Oil down, gold steadies, bitcoin corrects

Crude prices are paring losses as the dollar rally stalls and after Pfizer and BioNTech boost their coronavirus vaccine targets for this year.  The rally with oil was getting out of hand and prices needed to pullback as the uncertainty over short-term crude demand remains elevated.

Not only are virus lockdowns a risk but the implementation of vaccines is still hurdled with many logistical issues.  The process of determining who is eligible is constantly changing and signing up is not as easy as it should be.  Vaccine rollouts should go smoother under the Biden administration.

Chinese crude demand has been a bright spot for the oil market, but that could quickly end if China steadily sees new clusters. Beijing has clearly showed it will not hesitate in preventing the spread of COVID-19 infections and that will likely mean the new strain raises the risks of more lockdowns.

WTI crude has had quite the run since election day and prices should start to consolidate around the USD50 level.


Gold remains vulnerable

Gold appears to be fighting for its life as many technical analysts salivate or some strong technical selling indicators.  After forming a potential double-top at around the USD1950 level, gold prices had steadily declined below many key moving averages, potentially suggesting further pain is on the way.

Gold’s weakness is all about the tentative rebound in the dollar.  Higher Treasury yields have come along with a stronger dollar that needed to force the covering of the overcrowded bet against the greenback, which has driven down gold prices.

Despite charts that suggest gold looks like a falling knife, the fundamentals still make a sound argument for higher gold prices.  The economy can’t warrant the current trajectory of Treasury yields and that will force the Fed to talk down rates and eventually adopt yield curve control.  Gold is currently at key support, but if weakness persists all eyes will be on the USD1770-1800 range.


Bitcoin plunge continues

Bitcoin is getting pummeled as institutional money and hedge funds ride the current freefall.  Bear market plunges and excessive volatility are powerful agents that scare away the uninitiated.  But we are initiated and would like to point out that this was to be expected and that we already saw a near 20% decline earlier last week (referencing my note from January 7th).

Bitcoin is still up on the year and the current ~22% crash won’t intimidate any of the new institutional money that just hopped onto the crypto bandwagon.  Risk aversion and a strong dollar led to the bitcoin’s collapse as long positions got unwound and hedge funds accelerated the move by hitting the sell button.  Bitcoin could attract some interest if prices near the psychological USD30,000 level.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya