Commodities Diverge in Asian Trading

Commodities diverge as Oil settles near its recent highs ahead of tomorrow’s OPEC meeting, while Gold feels the pain of a stronger U.S. Dollar.

Crude recovered from its early losses overnight with both Brent and WTI finishing roughly unchanged as both contracts head into a pre-OPEC meeting holding pattern. President Trump’s proposal to sell half of the United States’ Strategic Petroleum Reserve had only a transitory effect, with guidance from various OPEC Ministers pointing to the likelihood of a six, and possibly nine-month extension, to the production cut arrangement.

As we head into tomorrow’s meeting, it does feel as if this has been priced into the both contracts for now raising the possibility of some profit taking once OPEC announces its decision. Attention will then turn to the rather forgotten U.S. Crude Inventory numbers out very late in the New York session.

Brent spot has opened at the top of its recent range in Asia at 54.15 but faces initial resistance just above, at 54.30 followed by 55.50. It is comfortably above its 100-day moving average and first support at 53.40 followed by 52.50.

WTI spot trades at 51.25 near its overnight highs and initial resistance at 51.45. It is followed by the rather more formidable 52.00 level. More importantly, WTI has finally closed above its 100-day moving average and first support at 50.75 with the next support below this at 50.00.

GOLD

Gold fell some 14 dollars overnight giving up all of Monday’s gains to finish rather bearishly near its lows around 1251 where it trades in Asia this morning. A resurgent U.S. Dollar and equity markets along with dovish comments on the Euro by various ECB members seem to have taken the wind out of gold’s sails for now.

Gold could face more pain if tonight’s FOMC minutes shows that the Federal Reserve is still on course for two to three more rate hikes this year and a start to the balance sheet reduction. Any combination of the above most likely being bullish for U.S. Dollars, especially as post a June hike, the market has not priced this possibility in on its forward indicators.

Gold narrowly avoided breaking support overnight at 1250 followed by 1245, a daily double bottom and the 200-day moving average. This average has been a crucial pivot point in gold’s price action this year, a daily close below could signal a deeper correction.

Gold has resistance at the 1265 area initially followed by the more important 1271.25 double top.

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 as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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