Oil Stages A Modest Recovery
The corrective rally that started in Asia yesterday extended through to the New York session as physical bargain hunters emerged. Brent crude finished 1.30% higher at $71.30 a barrel, and WTI rose by 1.60% to $69.20 a barrel. Both contracts are 10 cents higher in subdued pre-US-data Asian trading.
I continue to believe that any deeper sell-off in oil, while entirely possible on speculative culling, will be short-lived and followed by equally vigorous rallies. The US Non-Farm Payrolls tonight could be good for a directional move either way.
Brent crude has support at $70.00 a barrel, and then its 100-DMA just below at $69.75 a barrel. Failure of the 100-DMA could see another reactionary spike lower, potentially reaching the 20th of July low at $67.50 a barrel; however, this is not my base case.
Similarly, WTI has support at $68.00 a barrel, followed closely by its 100-DMA at $67.20 a barrel. Again, failure of $67.20 could see a snap reaction lower, targeting the 20th of July low at $65.10 a barrel. I would not expect it to linger long at those lower levels, however.
Gold Looks Fragile
The US Dollar remained firm, but US yields rose slightly overnight, pushing gold prices lower once again. Gold fell 0.43% to $1804.00 an ounce, closing just below the 100-DMA at $1804.50 an ounce, an ominous technical development. Prices continue to sag today, with Asia pushing gold 0.23% lower to $1800.00 an ounce.
Gold’s price action remains very poor, with its rapid retreat from multi-day resistance around $1830.00 an ounce, a significant red light. Its inability to withstand even modest US Dollar strength or slightly higher US yields is an0other warning sign, signalling the bullish traders appear to be running out of patience. Gold looks increasingly likely to stage another substantial move lower to wash out stale long-positioning.
For gold to hold above $1800.00 an ounce, it will need tonight’s US Non-Farm Payrolls to be very weak. A robust payrolls number will likely see a failure of major support just below at $1790.00 an ounce. That will signal a more significant move lower, targeting $1750.00 an ounce in the days ahead. Hold has nearby resistance at $1805.00, today’s 100-DMA, followed by the 200-DMA at $1820.00 an ounce. That is followed by a series of multi-day highs between $1830.00 and $1834.00 an ounce, which is now a very formidable barrier to further advances in the near term.
