Oil testing lows on China growth concerns
Oil prices are pulling back once more on Monday and once again taking a run at those lows we saw mid-July and last week.
The sell-off has accelerated today but actually started last Thursday after WTI ran into a wall of resistance just shy of $70, which aside from being a psychological barrier is also a 50% retracement of the move from the late July highs to last week’s lows.
This doesn’t bode well for crude in the near-term, especially with risk appetite looking a little more negative at the start of the week and Chinese growth fears rising.
A move below $65 would see attention shift back to $60, a surprisingly large correction overall when just over a month ago it was not far from $80. But the near-term trend is very much against it and the Chinese near-term outlook is weighing heavily.
Gold leaps higher but challenges remain above
Gold is surprisingly thriving a week after a small flash crash sent it tumbling back towards $1,680.
Since then, the yellow metal has done well; a combination of an overexaggerated initial move being unwound and a softer dollar/lower yields giving it new life. The US consumer sentiment data on Friday was particularly good for gold as it sent US yields and the dollar sharply lower.
I think people had become overly bullish following a raft of good data and hawkish Fed commentary so when the profit taking came, it did so in aggressive fashion.
Naturally, the worst sentiment reading in almost a decade turbo-charged the move, which is why gold exploded back above the $1,740-$1,760 resistance zone and now finds itself flirting with $1,800 once more.
Unfortunately for the yellow metal, unless this is the first in a series of shocking economic numbers for the US, I don’t think it’s fortunes have drastically improved. It will struggle to break $1,800 and the fact that it marks the 50% retracement of the early June highs to August lows won’t help matters.
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