Both oil and gold present constructive technical pictures mid-session in Asia following their Friday rallies.
Crude oil soared over two percent on Friday as rumours swirled that OPEC’s working group the ECB was considering recommending the double whammy of a production cut extension and deeper cuts ahead of this Thursday’s meeting. With the extension by OPEC and Non-OPEC already priced in, the added teaser of deeper cuts added fuel to the fire and capped an excellent week by both crude contracts.
We are somewhat sceptical that any more cuts can be on the agenda though, if only because of time constraints involved in thrashing out the details before Thursday. Having said that the market had discounted all hope of OPEC and Non-OPEC coming together to produce the cuts in January so maybe it is a case of where there is smoke, there is an oil fire.
Traders were not bothered with such thoughts, however, with Brent and WTI spots finishing Friday at their highs of 53.63 and 50.43 respectively. The positivity has carried on in early Asian trading with both contracts trading higher to start the week.
Brent spot trades at 53.75 and has closed above its 100-day moving average at 53.40, now initial support followed by the pivotal 52.40 region. Resistance lies in wait at 54.50.
WTI spot trades at 50.60, just below its 100-day moving average at 50.80 which is initial resistance followed by 52.00. Support sits in the 49.50 region followed by 47.90.
Both contracts look extremely constructive from a chart perspective, but both with be subject to the nuances of headlines as we approach Thursday’s meeting. We would expect choppy price action meaning traders should be nimble this week.
After Thursday’s massive pullback, gold found its mojo again on Friday, rising 10 dollars to 1256 as traders hedged weekend event risk. Unsurprisingly, some of that risk hedging has been unwound in early Asia trading with gold falling from 1258 to 1253 in the session and completely ignoring North Koreas latest missile test.
The price action overall remains constructive though as the U.S. Dollar continues to remain weaker against most of its G-10 currencies. The geopolitical heat is definitely rising again slowly, and this should ensure that gold remains bids on any material dips in the early part of this week.
Gold has support at 1246, a double bottom and its 200-day moving average followed by 1240. Thursday’s high at 1265 is initial resistance followed by the 1272 region.