Oil dips lower, gold tries to solidify

Oil prices ease in Asia

Brent crude and WTI had another choppy intra-day session on Friday, but like currency markets, closed almost unchanged as the dust settled on the day. ​ Futures markets remain deeply in backwardation, suggesting that in the real world, prompt supplies are as tight as ever, however rising recession fears globally do suggest that gains are likely to be limited in the shorter-term, geopolitics aside. Oil futures’ biggest problem is that the mind-boggling intra-day volatility seen of late is likely to reduce risk positioning, and thus, trading liquidity. A negative feedback loop is likely to exacerbate price moves.

Brent crude closed 0.25% lower at USD 103.60 on Friday, falling by 1.10% to USD 102.50 a barrel in Asia today. WTI closed 1.45% lower at USD 95.00 on Friday, losing another 1.0% to USD 94.05 a barrel in Asia today. Brent crude has well-denoted resistance at USD 108.00 a barrel on the charts, and then USD 111.00. It has support at USD 101.75 and USD 101.00 a barrel.

WTI looks the more vulnerable, moving below its 200-day moving average (DMA) at USD 94.75 today, and taking out support at USD 94.30 a barrel where it traced a double bottom USD 94.30, its overnight low and its 200-day moving average. (DMA). That now opens a retest of the July lows at USD 90.60 a barrel. Resistance is distant at USD 100.00 a barrel.

Brent’s outperformance likely reflects its use as the international benchmark for global trade in oil, where physical supplies remain tight. WTI, on the other hand, is a domestic benchmark meaning that US recession nerves seem to be more heavily weighing on its price. Brent crude continues to hold comfortably above its 200-DMA at USD 97.65 a barrel, and until that comprehensively breaks, I am not yet pencilling in the demise of high oil prices, although I have long said I believe a medium-term high is in place. The more analysts there were calling for USD 200 and USD 300 a barrel crude, the more confident I became.

Gold is trying to form a base

Gold closed higher for the second session in a row on Friday, quite the achievement given its woeful performance of late. Gold closed 0.50% higher at USD 1727.50 an ounce on Friday, edging slightly lower in moribund Asian trading to USD 1728.75. Two positive sessions do not mean gold is out of the woods, but the technical picture does suggest it is trying to form a base, having bounced off long-term support near USD 1680.00 an ounce last week. It faces a myriad of data and event risk this week, but the chart does suggest buying the dips toward USD 1700.00 with a tight stop wouldn’t be the dumbest call of your career.

Gold needs to overcome heavy resistance at the USD 1745.00 an ounce triple top before the gold bugs can really start to get excited. ​ It has support at USD 1680.00, and then the longer-term support around USD 1675.00 an ounce zone. A sustained failure of USD 1675.00 will signal a much deeper move lower targeting the USD 1450.00 to USD 1500.00 an ounce regions.

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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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