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Gold Price Regains Luster As BoJ & U.S. GDP Disappoint, Crude Oil in Support Zone

Gold Price Regains Luster As BoJ & U.S. GDP Disappoint, Crude Oil in Support Zone

Tyler Yell, CMT, Currency Strategist


Talking Points:

  • Gold prices (CFD: XAUUSD) rise alongside JPY as BoJ excluded Bond-Purchases
  • Crude Oil (CFD: USOil) prices benefitting from weak-USD despite oversupply worries
  • US Dollar Falls to Lowest levels since post-Brexit in G10 FX likely to impede commodity bloc for now

Markets appear disappointed by the BoJ announcement only to expand ETF purchases to ¥80T without adding bond-purchases to the program. The JPY had weakened ahead of the Bank of Japan announcement to as low as ~¥107 per USD the week before. After Kuroda’s press conference, the price of USD/JPY fell ~3% to near ¥102.25 per USD.

Commodity markets again appear agitated, but looking at Global Commodity Markets after the hotly anticipated Bank of Japan, WTI Crude Oil price has stopped its incessant decline, and the Metals sector is strongly up on the day. Yesterday, we shared that rising concern of over-supply in Oil is likely to weigh on economic cycle-sensitive crude oil prices.

Meanwhile,gold prices appear to be most sensitive to the potential of rate hikes by the Federal Reserve that would, in turn, lift the US Dollar. After a disappointing US GDP print on Friday (exp. 2.5% annualized, vs. 1.2% actual), the US Dollar fell and Fed Funds Futures are currently not pricing in the next hike until summer 2017. Gold’s ~26% rise YTD continues to look comfortable following a gradual rise higher as the stage is still set for haven assets that perform well against possible inflation from seemingly endless QE-programs from various major Central Banks that are without an answer as to what will make the economy robust again.

Where are gold and crude oil prices heading in the second quarter? See our forecasts here !

GOLD TECHNICAL ANALYSISGold prices are sitting comfortably above the Ichimoku Cloud, and the trendline drawn off the June lows hinting a move higher is the path of least resistance for the price of Gold. A daily close above 1,351 would signal a bullish resumption by trading above the R2 Weekly Pivot Level. Alternatively, a reversal below the weekly opening range low at 1313.30 targets the 50% threshold of the May-July range at 1287.30. The chart below has added Sentiment per the DailyFX SSI that shows a contrarian-signal Bullish bias is building. We’ve also added an Andrew’s Pitchfork that has framed price nicely as Gold Price sits above the Medium-term trend defining the median line. Lastly, the Relative Strength Index(5) looks to be favoring further upside as it moves closer toward 70.

CRUDE OIL TECHNICAL ANALYSISCrude oil prices have found support at the 200-DMA at $40.49/bbl thanks in large part to a weakening US Dollar. The support also comes at a Fibonacci 161.8% Extension of the first leg lower from $51.64/bbl-$45.58 extended from the lower high of $50.51/bbl.

We will continue to use the confluence of the 161.8% Fibonacci Expansion and the 200-DMA as support. The zone highlighted on the lower-right of the chart aligns with the March price correction from $41.87/bbl-$35.22/bbl. If the Bullish Trend from Feb-June is set to resume, a prior correction is a likely place for a reversal to form. However, we’re at the top of the zone, so buying now is very risky. As noted yesterday, a break above the 100-DMA ($44.64/bbl) would shift the bias to begin favoring upside again.

--- Written by Tyler Yell, CMT. Currency Analyst for

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.