Oil powers higher on US recovery target fixation

Oil markets ignored a rise in official US Crude Inventories, as they did with the API numbers the day before, with both Brent crude and WTI recording rallies post a no-surprise FOMC. Brent crude rose 0.60% to USD67.00 a barrel overnight, adding another 0.70% to USD67.45 a barrel in Asia. WTI, meanwhile, rose 0.95% to USD63.70, gaining another 0.50% to USD64.00 today in Asia.

It appears that much of the negative news regarding higher OPEC+ output and India’s Covid-19 situation is now baked into prices. The fall of the US dollar post-FOMC lifted oil markets which are myopically focused on the upside of the US recovery and the start of the US summer driving season.

Brent crude has very obvious resistance at USD68.00 a barrel, and support at USD64.00 a barrel, while WTI has support and resistance at USD60.50 and USD64.50 a barrel. I have stated before that a break of these broader levels will signal oil’s next directional move. A blow-out US GDP number tonight should see the resistance levels taken out with Brent crude targeting USD70.00 and WTI USD66.00 a barrel in the first instance.

FOMC sends gold higher

The Federal Reserve stayed close to its dovish message overnight at its latest FOMC meeting. With this risk point removed, investors rushed back into the global recovery trade, pushing the US dollar lower, with US bond yields remaining unchanged. That lifted gold prices overnight and continues to support gold in the early Asian session.

Gold has clearly denoted support at its 50% Fibonacci retracement in the USD1760.00 area, with equally firm resistance having been traced out near USD1800.00 an ounce, just ahead of its 100-day moving average. With the range for gold marked between these two levels, gold’s next directional move will be signalled by one side or the other breaking.

At this stage, post-Fed, the balance of probabilities has shifted to further gold strength. However, if US GDP QoQ blows out above 7.0% this evening, that may threaten the gold rally as the US dollar will likely strengthen. Assuming US GDP passes without incident, the path should be clear for a test of resistance at USD1800.00 and onto higher levels. Gold will remain well bid on dips towards USD1770.00 today.