Markets higher ahead of US data

Markets buoyed on final day of the week

We’re on course for a more positive end to the week in otherwise quiet trade, with US futures around half a percentage point higher, mirroring gains currently being seen across Europe.

I don’t think there’s been any particular catalyst for the rally on the final day of the week. It’s been quite a mixed week in general with political stories dominating the headlines, which haven’t really steered markets in process. The US GDP data on Thursday was encouraging, although we saw it have limited positive impact on indices on Thursday so there’s no reason to think that’s offering support now. We’ll get another batch of data today which will be closely followed, including inflation, income, spending and PMIs. Perhaps they can provide us some good news to take into the weekend.

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Oil correction on the cards?

The rally in oil is continuing to stall, with recent price action having been positive while at the same time not inspiring confidence in its ability to continue. Momentum is fading following a more than 30% rally from the lows near the end of the year. This is hardly surprising and while the break through notable technical resistance a couple of weeks ago could be a bullish signal medium-term, a patient approach could be warranted.

Oil (WTI and Brent) Daily Chart

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Should we see a correction in oil then technical support may come into play around $59-61 area in Brent and $50-52 in WTI. The longer term picture still looks bullish for oil, although record US output and a foggy global economic output is a clear headwind which could slow the price rise.

Aussie rebounds on Caixin PMI

Gold looking vulnerable as US GDP inspires latest sell-off

The US dollar was given a bump on Thursday, as fourth quarter GDP data showed the economy expanded faster than expected, albeit while falling slightly short on an annualised basis of Trump’s 3% target. The figure comes as countries elsewhere have struggled to expand, just look at Europe where some countries are either on the cusp of, or in fact in, recession. The beat on the data was the catalyst for a rise in the dollar which in turn weighed on gold and took it below $1,320, a level that had been well supported.

Gold Daily Chart

Gold continues to look vulnerable in the near-term having been on a good run for a number of weeks. Rally’s in the dollar are taking their toll on gold much more than they were a few weeks ago which is a clear sign that sentiment towards the yellow metal has shifted. The next test below is $1,300, a break of which could be the catalyst for another bearish move, at which point $1,275-1,280 becomes notable support.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.