CRUDE OIL & GOLD TALKING POINTS:
- Commodity prices at the mercy of broad-based risk sentiment trends
- US-China trade talks, Lyft IPO, Brexit vote to compete with data flow
- Technical positioning hints gold and crude oil prices may be topping
Crude oil prices began Thursday on the defensive. That seemed to follow from disappointing US inventory data. EIA statistics showed stockpiles unexpectedly added 2.8 million barrels last week. Newswires made much of a tweet from US President Donald Trump calling for OPEC to boost output, but price action didn’t respond. Rather, a recovery in risk appetite arrested the selloff and helped erase intraday losses.
Gold prices fell as the US Dollar tracked Treasury bond yields upward, undermining the appeal of anti-fiat and non-interest-bearing assets epitomized by the yellow metal. That this occurred against a backdrop of rising stock prices suggests a broadly-based retracement of recent moves inspired by global slowdown fears as operative narrative.
COMMODITY PRICES FACE AVALANCHE OF POTENT EVENT RISK
Looking ahead, a flurry releases informing the worldwide growth outlook are due. German retail sales figures, US PCE and home sales reports as well as UK and Canadian GDP statistics take top billing. Disappointments echoing the recently soft tone of global news-flow may stoke risk aversion, hurting oil. Gold might be buoyed if yields drop but gains may be capped if the US Dollar reclaims a haven bid.
Hopes for conflict resolution in US-China trade talks may work in the opposite direction. US Treasury Secretary Steve Mnuchin offered supportive comments from the sidelines of meetings between US and Chinese officials now underway in Beijing. The markets’ tepid response to signs of progress over the past several weeks warns that anything shy of a dramatic breakthrough might be overlooked by investors.
The outcome of another day of voting on the fate of Brexit in the UK House of Commons is a wildcard. Lawmakers will take up the withdrawal agreement backed by Prime Minister Theresa May after eight possible alternatives failed to secure a majority in indicative votes Wednesday. Ms May’s proposals have spectacularly floundered on two prior occasions. Another such defeat may spook markets and cool risk appetite.
Finally, the initial public offering (IPO) of shares in ride-hailing company Lyft is noteworthy. It marks the first in an expected series of high-profile tech IPOs this year. Uber, Airbnb and Pintrest are just some of the names being discussed. The firm raised a larger-than-expected $2.34 billion but how it fares on its first day of trade Friday given the markets’ jittery mood may be an important pace-setter for sentiment trends.
See our guide to learn about the long-term forces driving crude oil prices!
GOLD TECHNICAL ANALYSIS
Gold prices took a big step toward establishing a bearish Head and Shoulders topping pattern as the largest drop in four weeks cleared support in the 1303.70-09.12 area. Final confirmation is needed on a break of neckline support at 1282.83. That is immediately followed by support in the 1260.80-63.76 zone but ultimately hints at a larger down move toward the $1200/oz figure. Alternatively, a move back above 1309.12 targets the next layer of resistance at 1326.30.
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices are struggling to find near-term directional conviction, but a bearish Evening Star candlestick pattern suggests a top is in the works. Confirmation may come with a daily close below support in 57.24-88 area. That would overturn the rising trend from late December and expose the next downside barrier in the 55.37-75 zone. Alternatively, a push above resistance marked by the 38.2% Fibonacci expansion at 60.45 targets the 50% level at 62.28 next.
COMMODITY TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter