Oil edges upwards, gold under pressure

Oil prices continue edging higher

Oil prices are proving invulnerable to outside influence now, as the backwardation of the prompt futures curves underpins prices and highlights the strong physical demand. Overnight, Brent crude rose 0.66% to USD73.10, and WTI rose 0.55% to USD71.20 a barrel. Both contracts remain almost unchanged in subdued Asian trading.

Brent crude has nearby resistance at USD73.30, followed by USD76.00 a barrel, and only the failure of USD70.00 a barrel undermines the bullish outlook. WTI has resistance at USD72.50, followed by USD75.00 a barrel. Again, only a fall through USD68.00 a barrel changes its bullish outlook.

That oil has rallied so significantly in the face of notable US dollar strength suggests the rally has plenty left in it, as does the widening of the futures curve backwardation.

Gold vulnerable to a deeper correction

Gold endured a torrid overnight session, falling over USD30 an ounce to USD1844.50 at one stage before recovering to finish the session 0.60% lower at USD1866.00 an ounce. Gold moved lower in early Asia but held USD1860.00 an ounce and is now unchanged for the session.

The price action overnight suggests that quite a few stop losses were executed, with quite a bit of speculative long positioning put on near to USD1900.00 an ounce. The strong rally in the crypto-space will not be helping gold either, and if the US dollar or cryptos continue rallying, gold may face another downside test.

The USD1840.00 to USD1845.00 an ounce support region remained intact overnight. This continues a series of previous daily highs and the 200-DMA at USD1840.60 an ounce. Bullish traders can take heart that the support region held fairly well, but the recovery was modest in scale. Failure of USD1840.00 an ounce on a closing basis signals a more significant fall to the 100-DMA at USD1800.00 an ounce.

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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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