Oil pauses for breath
Oil prices probed the upside overnight but retreated to finish almost unchanged in New York. Brent crude fell by 0.12% to USD73.75 a barrel, and WTI was unchanged at USD73.05 a barrel. In Asia, both contracts have edged higher once again despite US dollar strength, Brent rising 0.80% to USD75.35 and WTI by 0.30% to USD73.25 a barrel. Copper and platinum group metals have rebounded this morning, and I suspect that has dragged oil higher with them.
Although US API Crude Inventories fell overnight, oil failed to maintain its rally, and markets will closely monitor the official crude inventory data tonight. Attention is turning to next week’s monthly OPEC+ meeting with the mark split over whether OPEC+ will increase production. That fear is moderating oil’s price gains, although underlying demand in the physical market means that any corrections lower will remain shallow and short.
Brent crude should now target USD78.00 and WTI USD76.00 a barrel in the coming sessions, despite OPEC+ fears, something that will become almost inevitable if the US short-squeeze has indeed run its course. The price action, however, may be much more two-way than uni-directional ahead of OPEC+ next week.
Gold treads water
Another market that appears concerned that talk of tapering is not over is gold. Gold’s attempted rally overnight quickly ran out of steam, leaving it finishing 0.23% lower at USD1778.00 an ounce in New York. Gold has risen a modest 0.18% to USD1782.00 an ounce in Asia in another session of directionless trading.
Market sentiment across asset classes is flip-flopping this week, and I expect that to continue to a lesser degree now that Powell has steadied the ship. Support at USD1760.00 has held impressively on Friday, while the USD1795.00 to USD1800.00 zone, containing the 100-DMA, provides equally firm resistance. A break of either of these support/resistance zones will signal gold’s next directional move.
I expect gold to continue to range in a very choppy manner between USD1760.00 and USD1800.00 an ounce for the remainder of the week, until financial markets make their minds up about whether the global reflation trade has run its course.
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 HalleySenior Market Analyst, Asia PacificWith 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.
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