Oil range trading, gold eyes US dollar

Oil prices remain firm

Markets can’t seem to decide what the OPEC+ standoff between the UAE and Saudi Arabia means for oil prices. On the one hand, a fracturing of OPEC+ unity could lead to an open the pumps free-for-all, an obvious price negative. On the other hand, OPEC+’s present agreement remains in force with the grouping in compliance. And OPEC+ usually manages to overcome intra-group disagreements, eventually. That expectation has supported prices.

 

The net result seems to have locked Brent and WTI into range trading mode for now, albeit a relatively wide and volatile one. Brent crude rose 1.65% to USD 75.55 a barrel on Friday, easing to USD 75.25 in Asia, with virus fears eroding recovery confidence. Brent crude looks supported under USD 73.00 a barrel in the bigger picture but capped at USD 78.00 a barrel for now.

 

WTI spiked 1.95% higher to USD 74.65 a barrel on Friday before easing to USD 74.30 a barrel in Asia this morning. WTI looks supported on dips to USD 71.00 a barrel, while prices looked capped ahead of USD 77.00 a barrel.

 

Looking at the ranges and volatility in oil markets last week, it is clear that much positioning culling and tail-chasing is going on. Oil’s fundamentals remain positive, albeit perhaps slightly less so than last month, as Covid-19 keeps on giving. That all makes for a great day traders’ market at the moment, but a less appealing one for investors. Until we get OPEC+ clarity, I expect the wide-ranging chop-fest day trading frenzy to continue. Unless one has an appetite for tail-chasing intra-day risk, patiently waiting for the whipsaw dips, or just watching the fun and games from the sidelines might be the most intelligent strategy at the moment.

 

Gold awaits US dollar developments

Gold has managed to reclaim USD 1800.00 an ounce over the last week, but it looks very much like a function of US Dollar weakness instead of a bright new dawn for gold as an asset class. The fact that gold has spent the last five sessions quietly ranging between USD 1800.00 to USD 1820.00 an ounce after its initial spike suggests that gold is in a holding pattern, waiting for events to transpire elsewhere.

 

Gold has fallen 0.40% to USD 1801.00 an ounce today, giving up all of its range-trading gains from Friday. Until the US dollar breaks higher or lower emphatically, this status quo is likely to continue. Broadly speaking, I expect gold to remain contained this week, bound by support at its 100-DMA at 1791.00 an ounce, and its 200-DMA above at USD 1828.00 an ounce.

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