Talking Points:
- Gold prices snapped the longest losing streak in 7 months
- Yields drop in risk-off trade may help extend the rebound
- Crude oil prices rose even as OPEC foresaw supply swell
Gold prices edged, snapping the longest losing streak since October 2016. Treasury yields declined as stocks fell and capital fled to the safety of government debt, boosting the relative appeal of non-interest-bearing assets including the yellow metal.
Crude oil prices continued to edge up even as OPEC acknowledged the challenge to its production cut scheme posed by swelling swing supply. The cartel revised its 2017 projection for non-member output by a hefty 64 percent to 950k b/d.
A weaker US Dollar may have accounted for crude’s gains. The greenback registered its first decline in five sessions and the largest in a month. That may have offered de-facto support to oil prices denominated in terms of the benchmark currency on global markets.
Looking ahead, a hefty dollop of top-tier US economic data may pass without fireworks. CPI, retail sales and consumer confidence statistics are all due to cross the wires. Their limited implications for Fed policy bets now that a June rate hike is fully priced in may rob them of market-moving potential.
Baker Hughes rig count figures are also on tap. The number of active US oil extraction points has increased for 16 consecutive weeks however, so another uptick will probably pass for status quo unless the increase is unusually large (greater than 18, say). An out-of-character decline will also command attention.
On balance, this may see sentiment trends dominate the spotlight once again. Shares declined in Asia and S&P 500 futures are pointing downward, hinting that more of the same may be in store through the week-end. That might translate into gold gains as yields fall but the implications for crude oil are as yet unclear.
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GOLD TECHNICAL ANALYSIS – Gold prices put in a bullish Morning Star candlestick pattern, hinting a bounce may be ahead. A daily close abovesupport-turned-resistance at 1241.50 sees the next upside barrier at 1258.62, the 14.6% Fibonacci expansion. Alternatively, a push below inflection point support at 1217.70 exposes the 38.2% level at 1199.07.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices continued to push higher, clearing resistance at 47.59 marked by the 38.2% Fibonacci retracement. From here, a daily close above the 50% level at 48.77 targets trend line support-turned-resistance at 49.29, followed by the 61.8% Fib at 49.94. Alternatively, a reversal back below 47.59 opens the door for a retest of the 23.6% expansion at 46.14.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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