APAC Commodities – The Good, the Bad and the Ugly

Oil long positions culled after an ugly drop; gold continues to drift ahead of the weekend’s election.

OIL

Both Brent and WTI collapsed some 4% overnight in a straight line. Brent spot trading below  53.00 and WTI spot touching 50.00 a barrel before both made an asthmatic recovery top open in Asia at 53.15 and 50.65 respectively. The blame is being laid on the EIA Crude and Gasoline Inventory numbers, which showed a less than expected crude draw, and a surprise 1.5 million barrel rise in gasoline stocks.

While there is no doubt that the numbers opened the floodgates, I would argue, as per yesterday’s comments, that main reason was the culling of the extreme short term long positioning in both contracts. The buildup of speculative longs on the previous week’s geopolitical tensions saw a lot of traders trying to get through a very small fire exit door at once.

Brent spot has support at 52.50 with resistance at 54.00. WTI has support at 50.00 initially and then 49.50, with resistance 51.50. A break of the lower levels in either contract potentially opening up another ugly evacuation of longs to the downside.

                                              

 

GOLD

As President Trump’s armada sailed off to Australia and not the Korean peninsula overnight, Gold traded slightly lower on the easing of tensions. However, with this weekend’s French Presidential vote event risk, it is hard to see gold forming a meaningful correction to the downside before next week at the earliest. Safe haven buying should continue to support any dips.

Gold opens mid-range at 1279 in Asia with support at 1270 and then 1260.

Resistance lies at 1292 and then 1296 initially. A series of lower highs on the topside would not be constructive from a technical perspective, but the aforementioned event risk and a generally tepid U.S. dollar should offset this.

Heading into next week, assuming no surprises in France this weekend, the picture for gold and other precious metals may well change.

 

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 Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley