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Oil and Stock Rallies Uphold Risk Trades while Gold Tumbles with Bonds

Oil and Stock Rallies Uphold Risk Trades while Gold Tumbles with Bonds

2015-11-04 06:27:00
Nathalie Huynh,
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Talking Points:

  • Oil rallies on prospective demand: higher refining rate, falling gasoline stocks, Cushing draw
  • Gold and safe haven assets plunge amid global stock rally
  • Copper edges up with risk-on although topside remains weak

Weekly report by the American Petroleum Institute released overnight showed a persistent pattern: crude stocks continue to climb by 2.8 million barrels, gasoline stocks on decline, while refinery operating rate improves by 0.9%. As outlined in past analysis, this picture implies positive future consumption for crude oil by refiners, therefore supports higher price.

A 0.5 million barrels drop of inventory at Cushing also underscores demand for crude stocks. Official statistics by Department of Energy’s EIA today may present similarly recurring picture after the first unexpected draw last week.

WTI oil rallied 3.8 percent or $1.76 in the US session and topped at 48.36, slightly over a technical resistance (38.2% Fibonacci) at 48.22. Brent oil posted a 3.6 percent or $1.75 gain. This resistance lilkely contains the topside until DoE report comes out in the US. Then oil could extend higher if the pattern of falling gasoline stocks, higher operating rate and Cushing draw persist for a second week.

Gold plunged below 61.8% Fibonacci level as yesterday’s Asia risk-on triggered a global stock rally through today. While regional equities posted over 2 percent gain, low-risk assets like gold and Australian fixed income tumbled around 1 percent. Overnight, US equities closed at a three-month high at 2116 while Treasuries fell.

Lower moves are in the horizon as local news stoked the fire. China October Caixin services PMI came at a three-month high of 52. China central bank (PBoC) today announced an exchange link between Shenzhen and Hong Kong this year to accelerate the opening of its financial markets.

Copper edged up to the highest in four days yet twice failed to break a resistance at 2.3425. After dodging a support level at 2.2730, copper has set for higher moves as market loaded on risk. Other industrial metals also rose in the wake of strong stock market rally.

Chinese data today are rather secondary and copper investors stay observant of more clues on China’s demand. Copper listed on Shanghai Future Exchange pared two-day losses after noon time.

GOLD TECHNICAL ANALYSIS – Gold fell past 61.8% Fibo of the August-October rise, hence opened up the area below that towards a lower Fibo at 1102.5. Downtrend signal is clear via moving averages and the bears may still see lower moves. A temporary correction may also emerge as today’s trade marks the first gain after five straight days of decline and momentum signals are poised to pick up.

Oil and Stock Rallies Uphold Risk Trades while Gold Tumbles with Bonds

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper twice tested and failed to break an intraday resistance at 2.3425, therefore it remains range bound on a third day. Inherent upward momentum helps copper prices to retain near upper bound. Range trades dominate the area between 2.2970- 2.3425.

Oil and Stock Rallies Uphold Risk Trades while Gold Tumbles with Bonds

15-minute Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil rallied over a previous resistance at 46.82, heading to 50% Fibo at 49.63 albeit no concrete uptrend signals. Momentum indicators peak out at upper bound of range which is not a good sign for bullish trades in the short term. The bulls may keep tight stops in case of a retreat below 46.82.

Oil and Stock Rallies Uphold Risk Trades while Gold Tumbles with Bonds

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Currency Strategist for DailyFX.com

Contact and follow Nathalie on Twitter: @nathuynh

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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