Another big rally for oil
The omicron is not-as-bad-as-we-thought trade continued to push oil markets higher overnight, thanks to more studies seemingly confirming that thesis. A sharp drawdown in official US Crude Inventories, following the API drop the day before, further gave the fast-money gnomes an excuse to pile back into long positions.
Brent crude leapt 2.1% higher to USD 75.55 a barrel where it remains in Asia. WTI rallied by an impressive 2.45% to USD 73.00 a barrel, where it remains in Asia. Brent crude has carved through resistance at USD 74.45 which becomes initial support, with resistance at USD 76.90 a barrel, the 100-day moving average (DMA). WTI is eroding resistance between USD 73.00 and USD 73.20 as we speak, which opens further gains to USD 74.10 initially, its 100-DMA. Support lies at USD 70.60 and then USD 70.00 a barrel.
The threat of OPEC+ action has receded dramatically now that Brent crude is back above USD 75.00 a barrel, with USD 80.00 a barrel being the sweet spot for the grouping, I believe. Oil’s direction is entirely reliant on omicron headlines, and as long as they stay more contagious but less virulent, oil’s rally is likely to continue, with intra-day ranges exacerbated by thin liquidity.
Gold rallies on weaker US dollar
Gold rallied overnight in a mechanical response to a much weaker US dollar on currency markets. Gold finished 0.80% higher at USD 1803.60, with the range flattered by lower than average trading volumes. In Asia, gold has added another 0.10% to USD 1805.40 an ounce.
Gold’s attempts to stage a meaningful recovery remain unconvincing, with traders cutting long positions at the very first sign of trouble intra-day. Gold lacks the momentum, one way or another, to sustain a directional move up or down. That said, gold could extend its gains into the end of the weak if growth sentiment remains ascendant.
Gold has formed a rough double top around the USD 1815.00 region which will present a formidable barrier, ahead of USD 1840.00. Support lies at USD 1790.00, followed by USD 1780.00 an ounce. USD 1790.00 to USD 1815.00 continues to be my call for the range for the week.
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