Oil stable, gold vulnerable

Oil is steady in Asia

Oil price continued their recovery from Thursday’s recession-fear sell-off as the supply-demand balance in the real world continues to underpin prices in the futures market. Brent crude rose by 2.15% overnight, easing 0.35% to USD 113.40 a barrel in subdued Asian trading. WTI rose by 1.90% to USD 100.55 overnight, easing by 0.30% to USD 110.10 a barrel in Asia.

Notably, Brent crude’s retreat last week saw its ascending 2022 trendline support at USD 108.50 a barrel tested and held in textbook fashion. The support line is at USD 109.00 today and we can reasonably assume that Brent crude’s downside is limited unless we get a couple of daily closes below it. That would open a deeper test lower, potentially extending to USD 100.00. On the topside, the USD 120.00 region looks unlikely to break thanks to global recession nerves, unless we get more negative developments related to Russia.

WTI looks the more vulnerable of the two, as recession nerves rachet up in the United States. Again, US data this week has upside risks in this respect. WTI is ranging each side of its 2022 ascending trendline support, today at USD 108.50 a barrel. A close below the 100-day moving average at USD 106.95 likely signals a test of USD 104.00 and potentially USD 100.00 a barrel. Resistance lies at USD 112.00 and USD 114.00 a barrel for now.

Gold underwhelms again

Gold fell to USD 1784.00 an ounce last Thursday in what looked like a series of stop-losses going through the market after USD 1800.00 failed. It immediately recouped those losses and has been trading sideways around USD 1810.00 an ounce since then. Gold has risen slightly to USD 1811.00 in Asian trading today.

Overall, gold bugs will have taken a modicum of comfort that the fall below USD 1800.00 an ounce was short-lived, but the ensuing rally is uninspiring, to say the least. It suggests that any further US dollar strength this week could see the downside tested once again as it refuses to react positively to the flattening and move lower by the US yield curve. The series of lower daily highs traced out over the last month continue to warn of the path of least resistance for gold.

Gold has resistance layered at USD 1820.00, its sloping downtrend line, then USD 1840.00, USD 1860.00, and USD 1880.00, the latter appearing an insurmountable obstacle. Support is at USD 1784.00 and then USD 1780.00 an ounce. Failure of the latter sets in motion a much deeper correction, potentially reaching USD 1700.00 an ounce.

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, 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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