Commodities: U.S. Data Puts Risk-Off, Back In Its Box.

Strong U.S. data takes the edge of this week’s political turmoil, as equities and oil rally and gold unwind some of its safe haven buying.

Oil managed to dodge the chaos in the FX and equity markets overnight to post solid gains and start the Asian session on a positive note. Brent and WTI no doubt took some heart from the U.S. equities which seems to have dampened the risk off flames, that were burning much brighter 24 hours ago, as we head into the weekend.

We have the OPEC meeting next Thursday and an extension to the production cut is probably completely priced in. It really comes down to whether it is extended by six or nine months. The former implying compromise and some dissension internally within the OPEC and Non-OPEC grouping and possibly sending out a bearish message on oil.

Turning to the here and now, both crude contracts have traded on a very positive note in Asia with Brent and WTI spot contracts up 50 cents at 52.70 and 49.70 respectively.

Brent has traded above its daily resistance at 52.60 and is eyeing a run at the 100-day moving average at 53.40. Intra-day support sits at 52.20.

WTI has finally closed above its 200-day moving average, this morning at 49.15 and initial support. Resistance is just above market levels in the 49.85/50.00 region with a break targeting its 100-day moving average at 50.85.

Both contracts will, however, continue to be at the mercy of headline driven moves, as have most markets been this week.

Gold is delicately poised this morning, having given up much of its previous day’s gains following the U.S. stock markets rally overnight. Having closed at its lows at 1246.50 however, it has enjoyed a sprightly start in Asia, trading four dollars higher to 1250.20. With the weekend ahead and the potential event risk that this may bring, it appears traders are happy to buy dips in today’s session as a safe haven hedge.

From a technical perspective, and despite the poor price action overnight, gold has held just above its 200-day moving average at 1246.00 marking its 2nd successive close above. A break would target a move to the 1240 level with key support today at 1230, the 100-day moving average.

Gold has initial resistance at 1255.00,  followed by the previous day’s 1265.00 high. A break targeting a move above the 1270.00 regions.

Gold will continue to be at the mercy of the nuances of politically driven headlines throughout the day, suggesting that traders should remain nimble throughout the session. The downside, however, should be somewhat limited as traders hedge political risk into the weekend.

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.