Oil dips, gold under pressure

Oil edges lower overnight

After the mighty rally of the day before, it was no surprise that some profit-taking appeared in oil overnight. Brent crude fell by 1.20% to USD65.00 a barrel, and WTI fell by 1.60% to USD61.15 a barrel, with both contracts making new highs intra-day before retreating. At the margins, a Fed Chairman comfortable with inflation at these levels, and a gradual reopening of Texas’s oil industry could be blamed. Realistically, the move lower overnight was all about speculative long positioning.

Oil prices are unchanged in Asia, and it is notable that regional buyers do not appear inclined to chase prices higher at these levels for now. However, that likely means that plenty of Asian buyers will reappear on any material dips in prices. Similarly, a move up through yesterday’s Brent crude high at USD66.80 a barrel will likely test their patience and resolve.

Brent crude has now broken through resistance at USD66.00 and directly targets the January 2020 highs at USD71.20 a barrel. Support appears at USD66.00 initially, followed by USD62.20 a barrel. WTI has cleared resistance at USD62.00 a barrel, which becomes intra-day support as the Texas deep freeze recovery drags on. WTI’s next target is the January 2020 highs around USD65.60 a barrel, and only the failure of USD59.00 a barrel calls the rally into doubt.

The RSI technical indicators on both contracts have remained in overbought territory today, but not markedly so. Given that developments in the physical market are driving the rally, oil will continue to find a wall of buyers awaiting any dips in prices.


Gold finds no Powell solace

An uber-dovish Jerome Powell gave no solace to gold, and nor did an easing of the US dollar and a neutral day for US bonds. Gold fell four dollars to USD1806.00 an ounce, before reversing that move in directionless Asian trading this morning.

Gold has now traced out a rough double-bottom near the USD1760.00 an ounce Fibonacci region. That highlights its importance as a long-term critical support zone, and failure now almost certainly condemns gold to a move to the low USD1600’s an ounce.

Gold has initial resistance at USD1830.00 an ounce, but far more formidable resistance remains just above in the shape of its 50,100 and 200-day moving averages. All three are clustered between USD1850.50 and USD1860.00 an ounce. The 50-DMA crossed below the 200-DMA last week, and the 100-DMA looks set to do the same in the next few days if prices trade sideways from here. Gold is by no means out of the woods yet.

The inability of gold to rally on what should have been a treble of supportive factors overnight suggests that the momentum of the gold recovery is waning quickly. Gold has been unable even to recapture the USD1830.00 an ounce region. Another sideways day will have the bears sharpening their claws once again.

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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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