Oil and Stocks Lead the Asian Rebound while Gold Calms

2016-01-21 03:56:00

Nathalie Huynh, Contributor

Talking Points:

Gold calmed as Asia market turned to buying risk again
Oil bounced back to 28 yet under threat of stock build in DoE report today
Copper rose the most, leveraging on stocks and oil recovery

Asia market started the day with a mild risk-on mood. Regional stocks made recovery attempts from yesterday’s lows. Similar things occurred in commodities: oil bounced back to 28s and copper returned to Tuesday levels.

Gold price calmed down to 1100 levels in line with a retreat of safe haven assets. The market continues to add gold (albeit gradually and despite imminent Fed rate hikes) as a security bet amid unpredictable volatility across assets. Gold holdings by exchange-traded funds display upward tendency and such stable demand should help to hold up gold prices.

WTI oil price yesterday settled below $27 at 26.55 for the first time since 2003, notwithstanding volatility on the last trading day of February futures contract. March contract takes over today and oil stabilized in the low 28s together with a return of risk appetite. However oil is not in for a full recovery as yet, given dragging fundamentals.

Later today U.S. Department of Energy’s EIA will release reports on crude inventories, expected to rise for another week. This would no doubt cause downside volatility in oil price. Inventories have surged to unprecedented levels since 2015:

Copper price bounced up to levels above yesterday’s trading band, gathering good interests on the back of a rebound in stocks and oil. This dependence on other assets makes it hard to predict the longevity of copper recovery. Meanwhile, news flows about metal producers selling assets to cope with low prices highlight the on-going weakness.

GOLD TECHNICAL ANALYSIS – Gold price is confined between early 2016 rally top at 1113 and 20-day moving average at the bottom. The MA comes at 1084 today. Range trading prevails in gold with a slight upward bias. Although there is no concrete threat to resistance level at present.

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price keeps on recovery for a fourth day. A former support now resistance level at 2.0020 would be the first challenge on its way back up to 2015 levels. Healthy momentum persists and investors should prepare for the event of resistance breach.

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS – After a dip to 27.55 yesterday, WTI oil is on a recovery today. Dip buying strategy still carries inherent risk as oil grapple a precarious balance. 10-day moving average continues to top price action at 30.0. Flat momentum signals indicate that any further declines could turn gradual.