Oil tumbles, gold holds steady

Oil suffers surprise sell-off

There must have been a lot more nervous speculative longs out there in oil than I thought, as a rising US dollar on Friday torpedoed the upside breakout in Brent crude and WTI. Brent crude tumbled 2.70% to USD66.25, and WTI plummeted by 2.155% to USD63.45 a barrel.

In typical nonsense fashion, there was a mad scramble to find some facts to fit the price action, with India’s situation being bandied around, plus OPEC+ production increases. Both had been unceremoniously discounted for the entire week previously. I believe it came down to nervous speculative longs with no tolerance for intra-day losses and the power of the surprise US dollar rally.

The weekend saw Iran proclaim that a deal with the US was near, ostensibly bearish for oil. However, the US has shot that premise down in flames today, saying no agreement is near. With China and Japan away, and precious little else to go on, oil markets in Asia see both Brent crude and WTI unchanged from Friday’s close.

The technical picture has been muddied, though, with both contacts slipping back into their broader fortnightly ranges. With plenty of data and event risk this week (an Iran deal could happen; or not), the most sensible strategy appears to be to hurry up and wait. Brent crude is now back in a broader USD64.00 to USD68.00 a barrel range. WTI is perched in a USD61.00 to USD65.50 a barrel range.

The technical picture continues to suggest that oil’s price recovery remains intact. However, given the price action on Friday, I will go back to the beginning of last week and state that oil’s next directional move will be signalled by a breakout, up or down, of the broader ranges outlined above.

Gold unchanged from Friday

Gold traders probably looked at the US dollar rallying even as US bond yields fell on Friday and felt somewhat confused. Often the best course of action in these cases is to take one’s hand off the controls and let the aeroplane fly itself (that often works, by the way) Content to watch the month-end flows play out, gold ended Friday unchanged at USD1772.00 an ounce, lower yields balancing out a stronger greenback.

Holiday thinned markets and an unchanged US dollar has seen gold advance higher slightly to USD1773.50 an ounce in directionless Asian trading. Narrow range trade will persist into New York time as markets wait to see if Friday’s price action was a month-end one-off.

Gold has resistance at USD1790.00 an ounce, followed by a double top and the 100-day moving average in the USD1800.00 an ounce area. Support is nearby between USD1755.00 and USD1760.00 an ounce. Resistance remains formidable ahead of USD1800.00 an ounce. Realistically, gold should be confined to a narrow USD1770.00 to USD1780.00 an ounce range until New York arrives at their desks.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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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