Oil almost unchanged, gold recovers

Oil markets remain a bastion of calm

I never thought I would say oil markets and bastion of calm in one sentence, but it is 2022, and anything is possible. Despite the noise seen in other asset classes from US data and central bank moves, oil was almost unchanged overnight. The US data and moves by Canada, Singapore et al to tighten policy should have been a headwind for oil. Most especially, the huge rises in the API and official Crude Inventories this week, as well as refined products, should also have seen oil move lower.

Instead, Brent crude finished 0.60% higher at USD 99.65 a barrel, rising 0.45% to USD 100.10 in Asia. WTI held its 200-day moving average (DMA), and finished 0.85% higher at USD 96.35 a barrel overnight, gaining 0.35% to USD 96.70 in Asia. Given the scale of the selloff on Tuesday, the plethora of negative price indicators over the past 24 hours, and an ugly technical picture, the fact that oil has been steady for 36 hours suggests that the worst of the sell-off is over for now. Risks are rising that oil stages a corrective rally carrying both contracts back above USD 100.00 a barrel once again.

Brent crude has resistance at USD 101.00, and then USD 104.00 a barrel, followed by a now distant USD 106.00 a barrel. It has nearby support at USD 98.40, followed by the much more important 200-day moving average (DMA) at USD 96.90 a barrel. Consecutive daily closes below the 200-DMA will force a reassessment by me, perhaps meaning that the backwardation of the futures curves moves lower with spot prices but remain in backwardation. A sort-off hawkish easing if you like.

WTI tested its 200-DMA at USD 94.00 a barrel overnight but managed to rally from there. ​ That forms initial support, followed by USD 93.00 a barrel. Resistance is at USD 98.00, followed by USD 101.00 a barrel.

Even gold looks resilient

Gold fell quite heavily on the high US inflation data prints overnight but managed to recover all those losses and close higher on the day. Along with an oversold RSI technical indicator, and in line with my belief that a US dollar correction is on the way, I believe some short-term relief may also be coming gold’s way, allowing it to rally somewhat.

Gold traded in a near-forty dollar range overnight, trading as low as USD 1707.00 an ounce post-US-inflation. However, it finished the session 0.55% higher at USD 1735.50 an ounce. In Asia, some incipient US dollar strength sees gold ease by 0.30% to USD 1730.00 an ounce.

Gold appears to be trying to trace out a temporary bottom at the USD 1707.00 area, with USD 1700.00 and longer-term support at USD 1675.00 an ounce looking safe for now. Failure of USD 1675.00 still signals more pain ahead, though. Gold has resistance at USD 1745.00, now a double top. That is followed by USD 1780.00, and USD 1800.00, its June downward trendline.

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