Oil falls, gold stays steady

Oil sinks further on growth concerns

Both Brent crude and WTI endured a tough day at the office yesterday as global growth concerns and a strong post-minute’s US dollar saw both contracts post significant losses. The US official crude inventories fell by more than expected, as did distillates, but traders chose to focus on the unexpected rise in gasoline stocks. Oil markets usually tend to cherry-pick the data they want to fit their preferred narrative with official crude inventories. The fact that they focused on rising gasoline stocks underlines the growth/recovery fears and emphasises it as the prevailing sentiment in the market.

Brent crude fell by 2.35% to USD 67.45 a barrel, adding ten cents to USD 67.55 in the Asia session. WTI plummeted by 2.95% to USD 64.60 a barrel, where it remains in Asia. Brent crude managed to close on support at this level overnight, but the technical picture now signals that further losses to the triple bottom support at USD 64.50 a barrel could occur. Resistance is distant at USD 70.00, and the USD 70.35 a barrel, its 100-DMA.

WTI fell through important double bottom support at USD 65.10 a barrel overnight, which becomes short-term resistance. That is followed by USD 67.50 and USD 67.80 a barrel; its 100-DMA. WTI has no technical support of note until USD 61.50 and then the 200-DMA at USD 60.60 a barrel.

It is hard to see the negative sentiment surrounding growth fears, a tapering Federal Reserve and increasing production from OPEC+ miraculously turning about-face overnight. With that in mind, the downside remains the weaker side for oil prices which are in danger of seeing another capitulation sell-off.

Gold falls in Asia

Gold remained on the sidelines overnight thanks to a New York session where US yields and the US dollar barely move post-FOMC Minutes. Gold contented itself with trading in a narrow USD 1777.00 to USD 1793.00 range before closing almost unchanged at USD 1787.30 an ounce.

Things have changed in Asia as markets have seen a bout of US dollar strength sweep currency markets this morning. That has caused gold to fall by 0.50% to USD 1778.80 an ounce. Having traced out a series of lower daily highs this week, failing multiple times ahead of USD 1800.00 an ounce. Gold may be signalling that last week’s frenzied FOMO upward momentum is waning, especially as the US dollar strength seems to have some strong momentum now.

Gold has immediate resistance at USD 1787.00 and then USD 1800.00 an ounce. That is followed by a formidable region containing the 100-DMA at USD 1808.20 and the 200-DMA at USD 1812.70 and a series of daily highs, each side of USD 1834.00 an ounce. Gold has a lot of wood to chop to maintain its rally.

Failure USD 1770.00 is likely to spark a flurry of hot money sellers cutting long positions, pushing it lower to the next support at USD 1750.00 an ounce. If that fails, gold will be vulnerable to a deeper retracement targeting the USD 1700.00 an ounce area.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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

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