Talking Points:
- Crude Oil (CFD: USOil) prices resume decline toward $40/bbl mark as glut re-emerges
- Gold prices (CFD: XAUUSD) steady near highest level in two weeks on Fed Outlook
- US Dollar remains weak after rate hike expectations now pricing in first hike in Aug. 2017
Commodities are a mixed-bag to open the month of August. Energy is down nearly across the board with WTI Crude Oil prices down > 3% at mid-day. However, Gold is higher, albeit marginally so thanks to the weak US Dollar, which doesn’t have a priced in rate hike until late summer 2017 per Bloomberg Current Implied Probabilities of Fed Rate hikes.
Last week, we shared that rising concern of over-supply in Oil is likely to weigh on economic cycle-sensitive crude oil prices. What makes today’s move surprising is that Oil tends to benefit from a Weak US Dollar, but on Monday, even a flat US Dollar has Oil down ~3%. July proved to be the largest monthly loss of Crude Oil for 2016 to date, and Friday’s Baker Hughes Inc. announcement showed the number of producing rigs is up for the fifth straight weak. An increase in production
as indicated by Friday’s announcement is re-stoking fears that the oil glut is back.
Where are gold and crude oil prices heading in the second quarter? See our forecasts here !
GOLD TECHNICAL ANALYSIS–A clear indication of a strong trend is when old resistance becomes new support. A breakout is required in an uptrend, which requires a burst of new orders. Channels drawn off trend extremes can be helpful in finding old resistance becoming new support, and Gold looks to be advancing within a large trend. Additionally, Gold prices are sitting comfortably above the Ichimoku Cloud hinting a move higher is the path of least resistance for the price of Gold. For now, only a reversal below the 20-day low at 1310.71would cause us to target the 50% threshold of the May-July range at 1287.30. We’ve also added an Andrew’s Pitchfork drawn off different points than Friday’s article, but it also communicates price advancements favoring an uptrend. Lastly, the Relative Strength Index(5) looks to be favoring further upside as it moves closer toward 70.
CRUDE OIL TECHNICAL ANALYSIS–Crude oil prices have broken below support at the 200-DMA at $40.47/bbl. The zone highlighted on the chart below 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 DailyFX.com
To receive Tyler’s analysis directly via email, please SIGN UP HERE
Contact and follow Tyler on Twitter: @ForexYell
