Oil prices rise overnight but are still rangebound

With the US dollar edging lower overnight, and no material retaliation by China against US companies, buyers returned in modest numbers. Brent crude rose 0.70% to USD45.00 a barrel, and WTI rose 1.0% to USD42.00 a barrel. Both contracts have risen another 30 cents a barrel in Asian trading to USD45.30 and USD42.30 respectively, as Asian currencies and equities rise.

Oil though, remains in range-trading mode, as evidenced by the market commentators desperately searching for nuanced facts to fit the non-descript price action overnight. Another significant fall in US API Crude Inventories tonight, for the 3rd week in a row, could spark more vigorous buying action. However, if the US rally continues, oil may make lots of noise, but still remain rangebound.

The August 5th high at USD46.20 a barrel remains Brent crude’s first hurdle, followed by its 200_DMA at USD46.95 a barrel. Support remains at USD44.00 a barrel initially. WTI has much closer resistance in the form of its 200-DMA, just above present levels at USD42.35. That is followed by its 5th August high at USD42.75 a barrel. Support remains at USD41.00 a barrel.

Of the two, WTI’s range compression suggests that a material directional move is imminent. It does, however, have a lot more technical wood to chop resistance-wise close to the market. Traders should not assume that the next move is 100% higher.


Gold continues to display sagging momentum

In a quiet overall session across most financial markets, gold continued to ease overnight. It fell by 0.35% to USD2028.00 an ounce. Today in Asia, with risk sentiment generally positive, gold has moved directly lower, falling 0.40% to USD2020.00 an ounce.

The technical picture continues to hint that momentum is fading in the near-term, with downside risks increasing. Notably, the gold/silver ratio continues to be sold, even at these 3-year lows, hinting that silver is likely to be more resilient in the near-term.

Near-term support is very close at USD2105.00 an ounce today. A failure will open up a retest of the USD2000.00 pivot level and a further loss suggests gold’s retracement could go as low as USD1960.00, or even as far as USD1940.00 an ounce. The underlying bullish case for gold is screaming as loud as ever. What investors need to understand is that such rallies are never linear forever, and in gold’s case, usually feature gut-wrenching intra-trend corrections.