Oil and Gold Waiting for Godot

Oil and Gold mark time in Asia as the technicals suggest both asset classes are starting to look a little tired.

Oil

Oil had a lethargic look about it overnight with both contracts trading in a one percent range but finishing unchanged from the day before. The Crude Inventories came in at a more substantial than expected -5.7 million barrel drop and various OPEC “sources” said the grouping was leaning towards a nine-month extension until the end of 2018. None of this managed to spark much life into traders though.

Both Brent and WTI continue to look constructive on the charts. However, rising support lines on both are now almost at the market, suggesting that both may soon be vulnerable to a short-term correction if broken. The street is looking for new inputs to reinvigorate the rallies, and one suspects that at these levels, both contracts are running into substantial shale producer heading via selling in the futures.

Brent is trading unchanged at 58.30 in Asia with resistance at 58.65 and then 59.10 with the latter level proving formidable. Below, the short-term support line comes in at 57.60 today followed by a double bottom at 57.20. Brents long-term support line now sits at 55.10 which is also the October low.

Brent Daily

WTI is trading at 52.00 with resistance at 52.50 ahead of its long-term resistance region between 53.50 and 54.50. It seems reluctant to test 52.50, having flirted with it all week, suggesting that producer hedging is capping gains even as the inventory data should have been positive for prices. The short-term support line is immediately below at 51.85 with a break suggesting a move to 51.00 initially. If this level were to give way, WTI would then be set for a retest of the pivotal 50.00 a barrel mark.

WTI Daily

Gold

Gold traded in a noisy 12 dollar range overnight, but that’s all it was, noise, as it settled at the end of the New York session a few dollars lower than the previous day at 1281.25. The fact that the dollar index was actually slightly lower overnight will be of concern to gold bulls with gold setting a series of lower daily highs over the week and unable to sustain rallies on dollar index weakness.

Perhaps the only positive is that gold held its 100-day mo0ving average at 1275.70 overnight with this level now a critical intra-day pivot. A break lower would open a retest of the 61.80% retracement at 1263.00 and then October’s low at 1260.60.

Gold itself is unchanged in moribund Asian trading this morning with resistance at the overnight high at 1289.00 followed by 1296.00.

With U.S. yields continuing to creep slowly higher and stocks markets riding exuberantly high it will most likely take some sort of geopolitical event to break the yellow metal out of its bearish malaise.

Gold Daily

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.