Gold, Crude Oil Price Volatility May Slow as FOMC Nears
- Crude oil prices fall as Brexit fears dent risk appetite
- Gold prices score longest winning streak in six weeks
- Risk-off momentum may slow as FOMC approaches
Crude oil prices closed at the lowest in three weeks yesterday as the sentiment-linked WTI contract continued to suffer amid broad-based risk aversion, tracking stock prices lower. Swelling “Brexit” worries appear to be stoking near-term selling pressure.
Shares and oil began to fall in tandem late last week as polls showed increasing support for voting the UK out of the European Union at a referendum next week while the priced-in odds of maintaining the status quo dropped to 65 percent, the lowest since Bloomberg began tracking them 11 months ago.
Worries about Brexit-driven market instability have echoed into Fed rate hike expectations, amplifying a dovish shift in the priced-in policy outlook touched off by May’s disappointing US jobs report. Not surprisingly, this has proven supportive for gold prices, with the metal touching a one-month high.
Looking ahead, the growing proximity of the FOMC rate decision may begin to cool momentum, with traders leery of over-committing ahead of high-profile event risk. UK polling data remains a potent wild card however and may keep risk trends gyrating as new figures cross the wires.
Are gold and crude oil prices matching DailyFX analysts’ expectations? See our forecasts here !
GOLD TECHNICAL ANALYSIS – Gold prices rose for a fourth consecutive day, gain to make for the longest winning streak in six weeks. A break above resistance in the 1297.14-1303.62 area (38.2% Fibonacci expansion, May 2 high) exposes the 50% level at 1327.29. Alternatively, a turn back below the 23.6% Fib at 1259.84 targets the 14.6% expansion at 1236.85.
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to edge lower as expected after forming a Bearish Engulfing candlestick pattern. A daily close below the 47.37-76 area (23.6% Fibonacci retracement, rising trend line) exposes the 38.2% level at 45.37. Alternatively, a move back above trend line support-turned-resistance at 50.46 targets the June 9 high at 51.64.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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