Oil prices crushed overnight
Oil prices fell heavily overnight as the Fed stability report highlighted recession risks for the US and other countries, and the China slowdown story gathered momentum. President Putin declining to declare an official war on Ukraine also removed a risk factor supporting prices. Brent crude fell 6.90% to USD 105.20, and WTI fell by 7.15% to USD 102.60 a barrel.
In Asia, the usual procession of dip-buyers has been notably absent today, leaving Brent crude to ease slightly lower to USD 105.10, and WTI to edge down to USD 102.35 a barrel. It is notable that Asian buyers have not appeared today, although oil has recouped some of its early Asian losses. That suggests that Asian buyers, with a China slowdown for context, are not feeling an urgency to buy oil on any sort of dip for a change. Normally that means they end up chasing prices higher in the days following, but today, oil markets do look like they have more room to fall in the shorter term.
Brent crude has formed a triple top at USD 114.75 a barrel, which will be a formidable barrier in the near term. Similarly, Brent crude had formed a triple bottom at USD 103.30 a barrel. A loss of USD 103.00 could signal a deeper correction targeting USD 100.00 a barrel. However, I am sticking to my broader USD 100.00 to USD 120.00 a barrel wider range ahead for now. WTI has resistance at USD 111.50 with support at a triple bottom at USD 100.25, failure of which should see a test of USD 100.00 a barrel. Once again, I remain comfortable with a USD 95.00 to USD 115.00 a barrel outlook in the medium term.
Gold’s range-trading continues
Gold fell heavily overnight, although it remains contained within a broader USD 1850.00 to USD 1900.00 an ounce range. Gold tumbled nearly 30 dollars to USD 1954.00 an ounce overnight, despite the US dollar and US yields staging a late session retreat. I suspect gold was found guilty by association with the bitcoin sell-off, and that we also saw an unwinding of risk-hedging longs after Putin declined to declare war on Ukraine.
Gold has risen by 0.42% to USD 1861.55 an ounce in Asia, piggy-backing the bitcoin recovery and the green shoots of risk sentiment pushing the US dollar lower in Asia. The rally is anaemic though and if the US dollar regains its mojo later today, gold could make a decisive test of the bottom of its recent range.
Gold is trading in a wide but noisy USD 1850.00 to USD 1900.00 an ounce range for now. A US dollar rally could see gold test the break-out triangle apex at USD 1835.00 swinging it into bearish territory. That said, gold needs to close above resistance at USD 1900.00, USD 1920.00, and preferably USD 1960.00 an ounce to signal a renewed structural move higher. I foresee more whipsaw trading ranges in the days ahead.
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