Oil rises in Asia, gold ticks higher

Oil finds eager dip-buyers in Asia

The gradual reopening of the Texas energy sector was enough to spur profit-taking over the previous two sessions in North America. Brent crude fell by 1.50% on Friday, with WTI falling 2.20% as markets grudgingly corrected a very overbought technical picture. Those losses were quickly unwound in Asia, with dip buying very much in evidence. Brent crude has rallied 1.50% to USD63.60 a barrel, and WTI has jumped by 1.55% to USD59.68 a barrel.

The falls on Thursday and Friday have taken the pressure off the very overbought Relative Strength Index’s (RSI’s) on both contracts. That reprieve may be temporary though, with today’s rallies lifting them near overbought territory again. That likely means that although oil remains bid, neither Brent crude nor WTI are likely to recapture their recent highs of USD65.50 and USD62.80 a barrel this week.

Attention will turn to the OPEC+ technical meeting next week with the grouping having some big decisions to make. With oil futures heavily in backwardation, indicating higher prices to come, OPEC+ will need to decide on whether to increase production, least US shale quickly returns to seize market share. Early indications are Saudi Arabia and Russia have divergent opinions. Rather than speculate this early in the week on OPEC+’s mindset, I am content to say that oil remains bid on dips and will stay that way.

Gold survives another day

Gold tested the critical long-term support at USD1760.00 an ounce on Friday, but a fall by the US dollar saved further fallout and sparked a mini-revival by the yellow metal. Gold finished the session 0.47% higher at USD1784.00 an ounce and has eked out a 50 cent gain this morning in dull trading.

The recovery by gold remains unconvincing and its technical picture remains grim. For now, the crypto market appears to have temporarily taken over the mantle of inflation head, for better or for worse. The best hope for gold at this stage is for the US dollar to move substantially lower this week, although recent price action suggests this only has the effect of stabilising gold prices, not turning the overall direction.

Gold needs to recapture the USD1800.00 an ounce region, and preferably USD1830.00 an ounce, before long positioning can start breathing again. The USD1760.00 an ounce 50% Fibonacci remains gold’s critical support zone. A daily close under USD1760.00 targets more losses to the 61.80% Fibonacci at USD1688.00 an ounce. Failure signals a deeper loss to the USD1600.00 an ounce area.

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

Latest posts by Jeffrey Halley (see all)