Talking Points:

  • Crude oil prices rise on hopes for OPEC output cut extension
  • Negative RSI divergence hints WTI may fail to break resistance
  • Gold prices look to US jobs report for direction amid deadlock

Crude oil prices rose as Saudi and UAE officials said participants in the OPEC-led production cut scheme agree that it should be extended. Kuwaiti oil minister Issam Almarzooq echoed the sentiment, saying he expects details of the updated effort to be announced at the cartel’s November 30 meeting. Iraq’s oil minister Jabbar al-Luaibi joined the chorus as well, saying his country would back a 9-month extension.

Russia poured a bit of cold water on exuberant speculation however. Energy minister Alexander Novak saying it is hard to decide if an extension is appropriate so long before the expiration of the current effort in March 2018. That may undermine follow-through potential in near term. On the data front, the Baker Hughes rig count report as well as ICE and CFTC futures positioning statistics are due before the week-end.

Gold prices seesawed in familiar territory but ultimately managed a small gain as doubts about the viability of a Republican tax reform initiative. Markets have wagered that the proposed tax cuts will be inflationary and force the Fed into a steeper rate hike cycle. The US Dollar fell against almost all of its major counterparts (with the British Pound being a notable exception), boosting anti-fiat alternatives.

The spotlight now turns to October’s US employment data. The economy is expected to have added a hefty 313k jobs last month as hurricane-related disruptions that produced a shock 33k payrolls drop in September dissipate. The unemployment rate is seen holding steady at 4.2 percent while wage inflation cools a bit, registering at 2.7 percent on-year having hit an eight year high at 2.9 percent in the prior month.

The Fed’s case for continuing to gradually pull back on monetary stimulus rests on the premise the hurricane season will not derail growth in a lasting way while transitory forces holding back price growth continue to fade. Faith in that narrative ought to hold up absent a major disappointment, capping gold price gains. An upside surprise echoing recent US data flow might even rekindle dormant selling pressure.

Where will crude oil and gold prices trade at year-end? See our forecasts here.

GOLD TECHNICAL ANALYSISGold prices are still trading water above support in the 1266.44-69.10 area (October 5 low, 38.2% Fibonacci expansion). A break lower opens the door for a test of the 50% levelat 1257.69. Alternatively, a breach of support-turned-resistance at 1277.16 confirmed on a daily closing basis paves the way for a retest of the October 20 high at 1291.06.

Crude Oil Price Gains on OPEC Cut Extension Hopes May Unravel

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to hover below resistance marked by the January 3 high at 55.24, a threshold reinforced by the 61.8% Fibonacci expansion at 55.78. A daily close above the latter exposes the 76.4% level at 57.36. Alternatively, a move back below the 52.86-53.23 area (38.2% Fib, September 28 high)targets the 23.6% Fib retracement at 52.11. Negative RSI divergence argues in favor of the downside scenario.

Crude Oil Price Gains on OPEC Cut Extension Hopes May Unravel

Chart created using TradingView

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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