Oil Threatens $30 over USD Gains, Gold Recedes as Risk Rout Pauses

2016-01-12 04:37:00

Nathalie Huynh, Contributor

Talking Points:

Risk rout recedes somewhat due to waning of selling actions and a flat CNY fix
Gold halted decline amid mixed sentiment in Asia
Oil traded heavy near 12-year low, free fall carries on
Copper sets for an inside day, weak on the downside

Asia market started on a slightly positive note as the risk rout wanes somewhat, after heavy sell-off dried up market liquidity. AUD, NZD and regional stocks stabilized albeit at low levels, while gold and JPY retreat. Gold, copper and oil moved downward in tandem for the first time in several days.

Oil price traded heavy in Asia over a return of USD strength, after a free fall to 12-year low at 30.88 in New York. Crude price has fallen 19.5 percent since the high on January 4, bringing it closer to the 20 percent benchmark of a bear market. There seems to be no deterrence to price rout as US supply is forecasted to increase in upcoming EIA report, while gloomy outlooks preside over China and emerging markets.

Gold price halted its overnight slide just ahead of Friday’s low at 1092.8. Mixed sentiment in Asia may keep the metal in a range unless Europe and US sessions induce different actions. Nevertheless holding interests should sustain in gold and other safe haven assets given unremitting growth worries.

Copper price also traded flat around overnight levels, albeit a dip to new low 1.9635 after a slightly lower Chinese Yuan fix. Mixed trading of regional stocks indicate a potential return of risk appetite with Shanghai Composite posting 0.38 percent gains. Any change in sentiment throughout this week would benefit copper and industrial metals.

GOLD TECHNICAL ANALYSIS – A downward reversal is emerging in gold price with today’s break of 5-day moving average and apparent downward momentum. Given recent market volatility, bull traders may still hold on until 10-day moving average at 1084 is also threatened. Range trade is possible between current levels and the top of 2016 rally at 1113.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price confirmed a clean break below 2.00 with intraday prices in 196-197 area today. Like oil, copper has progressively dipped to new multi-year low since 2016 started. However that slide seems to halt today as copper gingerly holds on to area above its overnight low at 1.9635. No break of this level would hint at positive news, although upside remains limited.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – To pick a bottom of WTI oil price, we examine monthly chart for the regions that WTI might descend to in case of break below $30. Apart from big handles along the way, 2003’s low comes at 25.80 while 2001 low comes at 19.40. Downward momentum also shows no sign to stop soon, thus lower moves are dominant. Monthly resistance level is found at 10-month moving average of 47.56.