Oil looks to OPEC+, gold rises

Oil faces challenges this week

Oil’s rally resumed overnight on a modest scale as physical buyers continued to appear on the dip and the US dollar weakened. Oil looks very much like it is going to range trade ahead of the OPEC+ meeting on Thursday although pre-meeting rumours will lead to some intraday volatility. Brent crude rose 1.10% to USD 84.50, and WTI rose 0.65% to USD 83.80 a barrel. In Asia, both contracts have moved another 0.50% higher to USD 84.90 and USD 84.15 a barrel.

The oil rally faces some headwinds this week and I note that Brent crude held its downside breakout on Friday from a technical perspective. Although I do not believe OPEC+ will succumb to pressure and raise production quotas by more than the previously agreed 400k barrels, they have surprised markets before. If they do raise production, the kneejerk sell-off could see oil fall by up to 10%.

Brent crude has resistance at USD 85.10 a barrel and then USD 86.00 a barrel. Support is at USD 82.20, and fail could see it retest USD 80.00 a barrel. WTI looks more constructive, holding trendline support, today at USD 82.10 a barrel.  It has resistance at USD 84.75 and then USD 85.50 a barrel. Below USD 82.10, USD 80.50 is a critical area of support, followed by USD 79.50.

Gold rises on weaker US dollar

Gold recouped some losses overnight thanks to a weaker US dollar. Gold rose 0.55% to USD 1793.00 before easing slightly to USD 1791.50 in Asia. With a heavy week of data and event risk ahead, the balance of probabilities has now shifted back to the downside for gold, unless the US dollar was, for some reason, to collapse this week. Time and again, gold investors have shown little to no appetite or ability to wear even the slightest pain on long positions above USD 1800.00 an ounce.

Gold now has resistance in the USD 1810.00 to USD 1815.00 an ounce region, with the far more formidable, and critical, USD 1832.00 to USD 1835.00 remaining far from reach for now. On the downside, gold fell through its one-month trendline support at USD 1787.60 on Friday, and its 100 and 200-day moving averages. The long capitulation saw gold fall to USD 1772.00 an ounce intra-day on Friday, and that forms initial support now. That is followed by USD 1760.00 and USD 1745.00 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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