Talking Points:

  • Gold traded choppy as Bank of Japan’s negative interest rate startled safe havens flows
  • Oil calmed from rally though supported by Russian’s news that OPEC will meet to curtail production
  • Copper traded flat, China’s Manufacturing PMI on Monday will reveal demand outlook

Bank of Japan adopted negative interest rate in its monthly meeting today, aiming to boost Japanese economy. That sent the JPY and JGB bond yields on a slump while created excessive volatility and dried up market liquidity. Commodities at large are seemingly oblivious to these volatility whereas Japanese and regional stocks bounced around.

Gold price sank near 1100 instantaneously after BoJ’s decision although it soon recovered. Additional stimulus from any central banks now would mean positive economic prospects, therefore reduce the needs for haven assets like gold. Choppy trading in gold may be expected for the rest of today, with emerging downside pressure. Before challenging the 1100 big handle, gold price would need to pass a support level at 1102.8.

Oil price traded a narrow range between 33 and 34as it calmed from an overnight rally up to 34.82 based on Russian Energy Minister’s statement that Saudi proposed a 5 percent production cut among OPEC members. Nothing has been confirmed thus far and a few OPEC representatives thwarted this curtail, as well as a meeting in February. Nevertheless, the lingering anticipation should provide support to oil price into February i.e. next week.

Copper pricetraded flat in Asia today in spite of large moves in USD following the Bank of Japan monthly meeting. Gains in regional stocks throughout the day helped to keep commodities in check. China demand concerns remain the biggest driver of copper and metal prices. As such, China Manufacturing Purchasing Manager Index (PMI) slated for Monday will be a critical data release that may sway copper price either way.

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GOLD TECHNICAL ANALYSIS – Gold price parks on a previous resistance level – now turned into support – at 1113. Today’s volatility may prompt a return to the area below it, all the way down to 20-day moving average and support at 1097.6. There has not been a clean break of 1113 hence gold remains vulnerable to downside movements.

Japan Negative Rate Spooks Gold, Rumored OPEC Cut Supports Oil

Daily Chart - Created Using FXCM Marketscope

COPPER TECHNICAL ANALYSIS – Copper price traded flat in the middle of November-January range. Similar to gold, upward momentum in copper seems to fade which may hinder the on-going recovery. Range trade likely dominates in the next few sessions with weak upside potential.

Japan Negative Rate Spooks Gold, Rumored OPEC Cut Supports Oil

Daily Chart - Created Using FXCM Marketscope

CRUDE OIL TECHNICAL ANALYSIS WTI oil approaches a previous support – now turned into resistance – at 34.25. Above this comes another resistance level at 38.36. Building upward momentum keeps focus firmly on the upside. Any test of resistance would be a good sign to the oil bulls.

Japan Negative Rate Spooks Gold, Rumored OPEC Cut Supports Oil

Daily Chart - Created Using FXCM Marketscope

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

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Contact and follow Nathalie on Twitter: @nathuynh