Oil and Gold Give And Take

It was give and take overnight with oil shrugging of a stronger dollar while gold wilted as U.S. bond yields rose.

OIL

Oil’s appeared to be correcting nicely overnight after the previous day’s impressive rally. That was until the American Petroleum Institute’s (API) Crude Inventory data hit the streets. The data showed a very surprising drawdown of 761,000 barrels against an expected rise of 3.422 million barrels.

Both crude contract immediately bounced by over a dollar to make back most of their losses on the day. WTI finished unchanged at 51.75 a barrel and Brent, perhaps being the more overbought of the two, finished down 50 cents at 58.25. Overall this is an impressive result and tonight’s official crude inventory data will now be closely watched. We continue to believe that caution is warranted at these levels though, as both contracts’ relative strength indices continue to be very overbought.

WTI

WTI is trading unchanged in early Asia with support at 51.00, the overnight low, followed by trend line support at 50.30. Resistance sits at 53.60 today, and this is the beginning of a massive resistance zone between 53.60 and 54.60 that has capped all rallies for the past year. WTI needs to close above this zone before longer-term bulls can start to believe the light at the end of the tunnel is not the train coming the other way.

WTI Daily

Brent

Brent trades unchanged at 58.30 this morning with resistance at 59.00 and then the 60.00 which will be formidable given its short-term overbought technical picture. Support rests at 57.40, the overnight low, followed by the 56.50 to 57.00 breakout zone.

Brent Daily

 

GOLD

Gold disappointed overnight, giving back almost all of the previous day’s gains to fall just over one percent or some 16 dollars to close in New York at 1295.35. Gold wilted as the U.S. dollar surged on rising bond yields across the curve out to 10 years and the EUR/USD correction post the German election continued. A dialling down of the geopolitical rhetoric overnight also reduced gold’s safe haven premium.

Gold is now back in the Fibonacci retracement zone between 1281.00 and 1299.00 with a daily close below the former suggesting the bull run may have run its course for now.

Gold is trading quietly at 1295.50 this morning with short-term support at 1288.00 and intra-day resistance now quite distant at 1214.00.

Gold Daily

All eyes will be on President Trump’s tax speech today in Asia which should dictate the near-term direction of the U.S dollar and thus gold.

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
Jeffrey Halley

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