Data Pumps Oil as Gold Deflates

Data was supportive to oil overnight, while a stronger dollar and a safer world see gold languish.

Crude Oil

Oil shot higher by over 3 percent overnight as the U.S. Crude Inventories dropped by a massive 5.2 million barrels against a decline of 1.8 million expected. Brent spot traded as high as 50.35 and WTI spot to 47.60 before both saw late session profit taking to open in Asia at 49.90 and 47.30 respectively.

With the OPEC production cuts almost certainly to be extended, oil may well have dodged the worst for now. However, it would be premature to call a bottom in prices as U.S. production continues to ramp up along with that of exempted OPEC members Libya and Nigeria. Compliance with cuts may also become a talked about issue in the second half of the year as production cut fatigue sets in amongst the OPEC and Non-OPEC parties to the agreement.

This both crude contracts opened positively and traded up around 40 cents in the Asia session.

Brent spot has resistance nearby at 50.35, the overnight highs, followed by 51.15, its 200-day moving average. Support lies at 48.50.

 

WTI spot has resistance at 48.50 and then 49.00, its 200-day moving average. Support lies distantly at 46.00 and then 45.50.

Gold

Gold struggles to sustain any meaningful rallies after it broke its 100-day moving average and closed below it on Tuesday. Gold rose to 1225 in overnight trading before belly flopping and settling near its lows of 1218.50 where it opened this morning. Asia has traded positively however as the back of high physical demand nearing 1221.25 as we start Europe’s session.Extreme long positioning, the spectre of a Federal Reserve rate hike next month, and the inability of any news to raise the safe haven temperature globally are all gradually eroding gold’s pricing premium.

However, extreme long positioning, the spectre of a Federal Reserve rate hike next month, and the inability of any news to raise the safe haven temperature globally are all gradually eroding gold’s pricing premium.

With a close under the 100-day average, now at 1224.50 and initial resistance, the technical picture points to a possible move to the 1195/1200 longer term support region. Interim support is found at 1214.35 with the possibility of more stop-loss selling from short-term players if it breaks.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.