Oil and Gold Sleepy on US Independence Day

Oil creeps higher overnight but remains mid-range

The impressive US labour data lifted Brent crude and WTI higher overnight, although only into the upper side of their respective one-month ranges. Like currency markets, nagging doubts remain about the US economy, with the employment data collected before the spiralling Covid-19 cases in the US Sunbelt.

Brent crude rose 1.85% to  USD 42.90 a barrel, with monthly resistance at USD 44.00 a barrel, and monthly support around USD 40.00 a barrel. WTI rose 1.55% to USD 40.40 a barrel. It has resistance at USD 41.60 a barrel, and support at USD 37.00 a barrel in the greater picture. Oil is unchanged in Asian trading as markets content themselves to sit out the US holiday.

Both Brent crude and WTI have quietly ground higher this week, supported by improving economic data from around the world. Lingering Covid-19 and geopolitical concerns, however, are tempering the momentum required to challenge their monthly highs for now. Oil should remain supported this afternoon on the expected positive monthly services PMI’s to be released across Europe today.

Gold finds eager buyers on dips overnight

Gold once again probed support at USD 1760.00 an ounce overnight, and once again rallied strongly of that level. It raced higher from the lows, to close at USD 1776.00 an ounce. That was despite the impressive US employment data adding to the global recovery narrative. The hike in US treasury yields after the Non-Farms quickly ran out of steam, and partially supported gold,

Nagging doubts appear to remain in investors’ minds though, about the explosion of Covid-19 cases in the US Sunbelt states and its possible negative effect on the recovery going forward.

Geopolitical considerations are also to the fore, with the US Congress passing its China sanctions bill. China also threatened the US, Britain and Australia with unspecified retaliation over their HK security bill stance. With a holiday in the US and the weekend upon us, some haven-directed buying of gold is evident

The price action in gold has been surprisingly constructive to me. Support is at USD 1760.00 an ounce with resistance is at USD 1790.00 an ounce. I expect those levels to contain gold into the week’s end. Only a fall through USD 1745.00 an ounce invalidates the bullish outlook. Although the gold price action is positive, it still lacks the momentum to mount a serious challenge on USD 1800.00 an ounce.

Gold is unchanged in moribund Asian trading and the lack of activity has continued in European trade.

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