Crude Oil Prices Hold Up as US Capacity Continues to Swell

2017-05-01 07:00:00

Talking Points:

Crude oil prices hold up as US capacity rises to 2-year high
Gold prices fall US budget, spending deal boosts Fed outlook
Markets may look past PCE, ISM data as FOMC approaches

Crude oil prices found little to inspire directional momentum even as US output capacity continued to build, with Baker Hughes reporting that the number of active rigs hit a two-year high last week. Traders may be turning pessimistic however. The latest batch of CFTC positioning data showed net long positions in benchmark WTI futures fell by the most in six weeks. Analogous ICE figures tracking exposure to contracts tracking the international Brent crude oil baseline are due today.

Gold prices fell as negotiators in the US Congress struck a deal to avoid a government shutdown through September and introduce a spending package worth nearly $1 trillion. Not surprisingly, markets interpreted the announcement as supportive for Fed rate hike prospects, sending the US Dollar higher alongside front-end Treasury bond yields and undermining support for the yellow metal.

From here, the spotlight turns to the Fed’s favored PCE gauge of US inflation as well as the ISM manufacturing sector survey. Both are expected to weaken relative to preceding outcomes but the results may pass with little fanfare as traders withhold directional commitment until the FOMC monetary policy announcement crosses the wires later in the week.

Retail traders are net buyers of gold. Find out here what this hints about on-coming price moves!

GOLD TECHNICAL ANALYSIS – Gold prices continue to digest losses having turned downward from resistance below the $1300/oz figure, as expected. Near-term support is at 1258.62, the 14.6% Fibonacci expansion, with a daily close below that exposing the 1235.91-41.50 area (October 7 2016 low, 23.6% level). Alternatively, a push through trend line resistance at 1286.20 targets the 1295.46-1308.00 zone (April 17 high, support-turned-resistance).

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continue to mark time above trend line support established from August 2016. A daily close below the 48.85 (trend line, 61.8% Fibonacci expansion) targets the 47.08-69 area (March 22 low, 76.4% level). Alternatively, a rebound above the 50% Fib at 49.78 exposes the 38.2% expansion at 50.71.