Oil rallies on reopening and lower US dollar

Oil markets ignored the US ISM data, preferring to concentrate on the reopening announcements from around New York and boosted by the fall of the US dollar. Oil may also have been encouraged by signals from the US government that a US/Iran deal was no nearer than previously.

Brent crude rose 1.50% to USD67.65 a barrel, easing slightly to USD67.45 a barrel in Asia. WTI rose 1.60% to USD64.65 a barrel before easing slightly to USD64.35 in Asia.

Despite shorter-term profit-taking pushing oil slightly lower in Asia, both Brent and WTI have now moved to near the top end of their one-month ranges once again. Given that the fall in the US dollar overnight appears to have been the primary driver of the rally, much will depend on its direction once Europe and New York markets arrive this afternoon.

Brent crude has resistance at USD68.00 and USD69.00 a barrel, with support at USD66.00 and USD64.50 a barrel. WTI has resistance at USD65.00 and USD65.50 a barrel, with support at USD63.00 and USD60.50 a barrel. A Brent crude close above USD69.00 implies a near-term test of USD70.00 followed by USD72.00 a barrel.

Gold retesting major resistance

A significant beneficiary of the overnight fall in US yields, and a retreat by the US dollar, was gold. Gold rose by 1.25% to USD1794.00 after testing resistance around USD1800.00 an ounce. In Asia, profit-taking has seen gold retreat modestly to USD1789.00 an ounce.

Given gold’s direct correlation to the direction of US 10-year yields and the US Dollar, demonstrated in spades overnight, further gains are entirely reliant on weakness in the other two. Should that scenario play out today, entirely possible if US Factory Orders disappoint, gold will mount a vigorous assault on resistance at USD1800.00 an ounce, home to its 100-DMA.

A rally through USD1800.00 opens further gains to USD1825.00 an ounce. Meanwhile, support remains distant at $1870.00 after the overnight moved, followed by the Fibonacci support at USD1860.00 an ounce. The USD1760.00 to USD1800.00 support/resistance has boxed gold in beautifully over the past three weeks. Any daily close, above or below, should be respected from a technical perspective.