Oil consolidates at the top of its range
Oil had a directionless session overnight, content to wait for a US stimulus outcome and continue consolidating its recent gains. Oil markets wholly ignored the US API Crude Inventory rise to 1.14 million barrels, suggesting that traders are happy to be long at these levels ahead of official US inventory data this evening.
Brent crude finished the overnight session 0.40% higher at USD48.80 a barrel, but has given up those gains in Asia, falling back to USD48.55 a barrel. The story is much the same for WTI, finishing unchanged at USD45.60 a barrel, and edging lower to USD45.40 a barrel in Asia. The falls may be a delayed reaction to the US API inventory data, but nothing suggests a structural turn in sentiment.
Brent crude has support at USD48.00 a barrel, and resistance at USD50.00 a barrel. A loss of USD48.00 could see the correction extend to USD47.00 a barrel. WTI has support at USD45.00 a barrel, and resistance at USD46.70/USD47.00 a barrel. A loss of the support could see the correction extend to the USD43.00 a barrel region. In the case of both, as long as the secondary supports hold, the uptrends remain intact.
A stimulus breakthrough and a more dovish FOMC next week will both be quite bullish for oil and should see both test, and break, their December highs.
Profit-taking hits gold in Asia
Gold rose 0.45% to USD1870.00 an ounce, failing just ahead of its 50-day moving average (DMA) at USD1878.00 an ounce. That failure appears to have prompted Asian investors to take some risk off the table, with gold falling 0.55% to USD1860.00 this morning.
Some consolidation was overdue after an impressive rally this week, and gold would have to break support at USD1825.00 an ounce, and its 200-DMA at USD1808.00 an ounce, to call into question the rally. Gold has resistance at the overnight high of USD1875.00 an ounce, followed closely by the 50-DMA at USD1878.00 an ounce. That is followed by USD1900.00 an ounce and then the 100-DMA at USD1912.00 an ounce.
Next week, a dovish FOMC, particularly in the scenario where they look to cap rates in the longer end of the US yield curve, should relight the gold rally. A US stimulus breakthrough this week will likely be neutral. Until next week’s FOMC, gold should continue to find willing buyers on dips now, and slowly grind higher through USD1900.00. As previously stated, I believe that gold made a structural low at USD1760.00 an ounce last week.