Oil steady, gold under pressure

Oil holds its Monday gains

Oil prices powered higher overnight with Brent crude nearing USD 85.00 and WTI USD 82.00 a barrel as the Asia rally continued into New York. Only a statement by a US official saying stocks could be released from the SPR capped the gains, leading to a small retreat into the close. Brent crude finished 1.33% higher at USD 83.65, and WTI rose 1.25% to USD 80.50 a barrel for the session.

 

In Asia, prices are almost unchanged. Asia is not chasing prices higher today and part of that reason could be because the short-term technical indicators have entered overbought territory. Combined with reports of huge, long speculative positioning in the futures markets, it would not surprise me in the least, if we saw a sharp sell-off of 5 to 8 dollars a barrel at some stage this week. As I have stated previously though, given the state of play in the physical market, a speculative long culling will be a dip to buy and is likely to be very short-lived in duration.

 

Brent crude has resistance at USD 85.00 and USD 87.00 a barrel, with support at USD 82.00 a barrel. WTI has resistance at USD 82.00, with support at USD 78.70 a barrel. Once again, watch the relative strength indexes (RSIs) this week. The higher into overbought territory they go, the deeper the short-term correction lower will be.

 

Gold nervously poised above support

Gold prices edged lower overnight in a dull session, gold finishing just 0.14% lower at USD 1753.50 an ounce before reversing those losses exactly to USD 1757.00 an ounce in listless Asian trading today. Having failed at USD 1780.00 an ounce on Friday, gold is now ominously consolidating at the bottom of its week’s range near USD 1750.00 an ounce.

The US dollar did not continue correcting lower as I expected, and gold can probably thank the US bond market’s closure overnight for not finishing the day much lower. Gold is now in danger of testing support and its fate is entirely in the hands of US yields this evening.

If US yields trade sideways this week, gold should trade in a USD 1740.00 to USD 1780.00 an ounce range with an upside bias. Critical support lies at USD 1720.00 an ounce, and if US yields rise, it could be tested. The USD 1800.00 region, with the 100 and 200-day moving averages (DMAs) each side of it, remains a formidable barrier.

 


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

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