Talking Points:
- Crude oil prices surged after third-quarter US GDP data surpassed forecasts
- Gold prices rose on rumors Jerome Powell may succeed Yellen as Fed Chair
- Mueller’s first indictment in Trump/Russia probe might trigger risk aversion
Crude oil prices moved sharply higher as third-quarter US GDP data surpassed economists’ expectations, boosting demand prospects for the cycle-sensitive commodity. Output grew at an annualized pace of 3 percent, beating out bets on a more modest 2.6 percent increase.
From here, a lull in relevant oil-specific might allow a bit of room for consolidation before the next major push, one way or the other. Telltale S&P 500 futures are pointing lower, hinting that a sentiment-driven correction lower may be in the cards.
News on the first indictment to stem from Special Counsel Robert Mueller’s investigation into possible connections between Russia and the Trump presidential campaign might emerge as trigger. If the move is seen as compromising tax cut prospects, the announcement may inspire a risk-off mood.
Gold prices rebounded after touching the lowest level in three weeks. The rally came amid rumors that US President Donald Trump is leaning toward choosing Fed Governor Jerome Powell to succeed Chair Janet Yellen when her term expires in February 2018.
The markets may have reckoned that – short of nominating Yellen for a second term – Powell provides the most continuity with the central bank’s current posture. That might have been judged as a relatively less hawkish outcome than opting for outsider candidate and Stanford economist John Taylor.
The Fed’s favored PCE inflation gauge is next on tap, with the core on-year rate expected to remain unchanged at 1.3 percent. The data may not prove especially market-moving absent a major deviation from forecasts, especially if politically-inspired risk aversion offers de-facto support as bond yields retreat.
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GOLD TECHNICAL ANALYSIS – Gold prices paused to digest losses above support in the 1266.44-69.10 area (October 5 low, 38.2% Fibonacci expansion). A daily close below that targets the 50% level at 1257.69. Alternatively, a move back above falling trend line resistance at 1276.36 clears the way for another challenge of the October 20 high at 1291.06.
Chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices finally pushed above resistance in the 52.86-53.23 area (September 28 high, 38.2% Fibonacci expansion), opening the door for a challenge of the 50% level at 54.51. A further push above that targets the 61.8% Fib at 55.78. Alternatively, a turn back below 52.86 targets rising trend line support at 51.22.
Chart created using TradingView
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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