Crude prices tumbled from a 10-month high as the dollar rebound resumed following sluggish US economic data that painted a darker short-term outlook for the world’s largest economy. Oil needed a big catalyst to keep the recent rally going so energy traders didn’t need much to head for the sidelines. Heading into a three-day weekend in the US, now was a great time to take off some risk, which is also adding to today’s slide in oil prices.
The dollar rebound could last a little longer as Congress will have the standard back-and-forth over stimulus negotiations. Stimulus uncertainty should keep commodities under pressure as risk aversion flows will boost the greenback.
Gold was supposed to have an easy end to the week after prices were supported on both Fed Chair Powell’s comments on tapering and on Biden’s announcement of a larger-than-expected COVID relief bill. The overcrowded bearish bets against the dollar still needs to get undone. It seems last week’s dollar rebound was just the beginning.
Gold has a strong case to rise higher, but it won’t shake off a surging dollar. The dollar seems poised to make a big run here as we brace for a few weeks of stimulus debate in Washington DC. Gold could soften towards $1800 and if buyers don’t emerge, it could get ugly fast. With many Americans taking advantage of the three-day weekend, gold could have some wild swings.
Bitcoin is the riskiest asset and is one of the first things sold when we have a strong move in the dollar. Bitcoin could get in trouble if this dollar rally accelerates. The $30,000 level could easily get tested for Bitcoin if the greenback pushes higher.
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.