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Oil Slumps before Stockpile Data, Gold Recovers as USD Recedes

Oil Slumps before Stockpile Data, Gold Recovers as USD Recedes

Nathalie Huynh, Contributor

Talking Points:

  • Speculation of stock build data by EIA sends oil lower
  • Gold is at 3-month low coming up to talks by Fed members
  • Copper returns to range-bound as market thins out

Choppy trading overnight saw the USD retreated, which helped commodities to recover in the Asian morning. A 3.4 percent slump in oil also dragged European and US stocks lower.

Oil returned above $43 in Asia along with a recovery in commodities, after $1.5 or 3.38 percent fall overnight toward 42.58 support. This support level was the lowest since August 27. A failure to break through it today will put an end to six days of straight declines.

Weekly stockpile data from U.S. Department of Energy is due today after a delay on US holiday. Market is expecting it to confirm Tuesday’s stock build report from API. If so, that will pressure oil price even lower.

Gold pared yesterday’s losses in the Asian morning as USD slid. Overnight, it fell to the lowest since August 7 and we got hawkish comments from San Francisco Fed's Williams that there is a very strong case for lift-off. The downside of gold remains vulnerable coming up to a series of talks by other Fed members today: Bullard, Fed Chair Yellen, Evans, Dudley, and Fischer.

Copper quickly returned to its usual trading range between 2.2060 and 2.2300 after a brief break of support and a new six-year low on COMEX. Copper on London Metal Exchange held above its record low however. Zinc also saw further selling that led to a fresh six-year low. The metal will likely retain the range this week.

GOLD TECHNICAL ANALYSIS – Gold is sliding yet again as London comes to work and may test 1085.5 support level again. The recovery during Asian session may prove short-lived if Fed talks today affirm chances of a December lift-off. Gold and copper prices are dependent on event risks today. Gold’s downside is likely limited as market is heavily short after Friday’s crash.

15-minute Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper returned above 2.2025 support level so far. Upward momentum signals have emerged hence prices may hold out around this level or enter a correction period. If copper fail to break support later in this session, the recent downturn will likely come to an end. However upside potential is limited with no signs of a rebound yet.

DailyChart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – WTI oil holds out above 42.58 support level and momentum signals are poised for an upturn. Future direction of oil price will be entirely dependent on how data from EIA plays out today. Therefore the bulls and bears alike should be cautious of event risk. The 5-day moving average provides a resistance at 43.67.

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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