Talking Points:
- Crude oil prices drop as OPEC-linked optimism dissipates
- Gold prices flat-line amid lull in news driving Fed outlook
- Corrective flows may dominate key commodities near-term
Crude oil prices continued to fall for a third day despite a larger-than-expected drawdown reported by the official EIA set of weekly inventory figures. Stockpiles shrank by 2.4 million barrels, a larger decline than the 1.4 million drop projected by economists and the 2.2 million decline foreshadowed by a private-sector estimate from API.
Absent a discrete catalyst, the move may reflect profit-taking on recent gains as elation following a last-minute OPEC supply cut deal dissipates. The breadth of non-OPEC participation remains unknown before a meeting of cartel members and other key producers this weekend. Meanwhile, an expected pickup in US output threatens to offset output restriction elsewhere.
Meanwhile, a lull in news-flow shaping Fed monetary policy bets has left gold prices mired in a narrow consolidation range. Fresh fodder will probably prove scarce before next week’s FOMC meeting. In the interim, traders may begin to worry that the Fed’s rates forecast will be more timid than that already priced in by markets, fueling a corrective bounce. Tightening expectations swelled after the US presidential election.
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GOLD TECHNICAL ANALYSIS – Gold prices are still range-bound but positive RSI divergence hints a correction higher may be in the cards. A daily close above the 14.6% Fibonacci retracementat 1183.28 targets the 23.6% level at 1199.50. Alternatively, a move below the 23.6% Fib expansion at 1158.15 exposes the 38.2% barrier at 1133.83.
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices turned lower as expected after putting in a bearish Dark Cloud Cover candlestick pattern. From here, a daily close below the 38.2% Fibonacci retracement at 48.49 targets the 50% level at 47.28. Alternatively, a reversal above the 23.6% Fib at 49.98 exposes the 14.6% retracement at 50.90.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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