Oil treads water
Oil prices ranged overnight, with an early sell-off reversed after US API Crude Inventories fell by 4.728 million barrels, somewhat higher than expected. The net result left both Brent crude and WTI near unchanged at the end of the session. Brent crude finishing at USD 74.70 a barrel and WTI at USD 71.90 a barrel.
Asia has been equally quiet, with both contracts edging 20 cents higher in modest pre-FOMC trade. Official US Crude Inventory data is more likely to move prices this evening than the FOMC unless the taper word is mentioned. Official inventories are expected to fall by 2.9 million barrels, with gasoline stocks also falling. A more significant than expected fall could be enough to shake Brent and WTI out of their ranges and test the upside.
I am not expecting any fireworks until after the FOMC conclusion. For now, I stick with my previous assertions that the USD 74.00 region for Brent crude, and USD 72.00 for WTI, look like equilibrium levels. Brent should trade in a USD 73.00 to USD 75.00 a barrel range, and WTI should remain in a broader USD 71.00 to USD 73.00 a barrel range.
Gold rises pre-FOMC in Asia
Gold continued to range quietly overnight, finishing barely changed at USD 1799.00 an ounce. Some pre-FOMC risk hedging is evident in Asia, though, no doubt assisted by the ructions in China’s stock markets, which is also supporting digital currencies today. Gold has risen by 0.40% to USD 1806.40 an ounce.
Support at the overnight low and the 100-DMA at USD 1799.00 an ounce is unlikely to be tested in Asia and should hold easily pre-FOMC. Assuming no change in the language of the FOMC statement, gold should look to test resistance at USD 1812.00 an ounce, followed by the 200-DMA at USD 1822.00 an ounce.
Any change in tone from the FOMC to the tapering side of the equation is likely to see support at the 100-DMA at USD 1799.00 an ounce broken, followed by a test of USD 1790.00. A daily close below the latter will signal a deeper correction targeting the USD 1750.00 an ounce region in the days ahead. However, this is not my base case, and I expect gold to remain locked into a USD 1790.00 to USD 1820.00 an ounce range for the rest of the week.
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