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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices pressured as 2019 Fed rate hike outlook continues steepen
  • Crude oil price chart setup hints a significant top may be taking shape
  • Brazilian election results may disrupt an otherwise consolidative tone

Last week’s focus on swelling Fed rate hike bets looks to have carried over into price action at the start of the trading week. The priced-in tightening path implied in Fed Funds futures now calls for two hikes and puts the probability of a third at 23.8 percent, the highest yet this year.

This has understandably buoyed the US Dollar, weighing on commodity prices by extension. Gold prices are down to reflect the ebbing appeal of anti-fiat alternatives while crude oil prices are giving in to de-facto selling pressure since they are priced in USD terms on global markets.

COMMODITY DROP MAY STALL, BRAZIL ELECTION EYED

Follow-through may be limited in the near term however. The economic calendar offers little to propel the narrative while the proximity of heavy-duty event risk by way of an IMF global economic forecast update (Tuesday) and US CPI data (Wednesday) discourages directional commitment.

With that in mind, a consolidative tone may ultimately prevail. The outcome of the first round in Brazil’s general election may yet stoke volatility however. An apparent triumph for populist firebrand Jair Bolsonaro has been overlooked for now, but this might change once local markets come online.

See our guide to learn about the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices continue to hover below pivotal resistance at 1214.30 (range top, trend line set from mid-April) but the overall trend continues to point decidedly lower. Initial support is marked by the September 28 low at 1180.86, with a daily close below that exposing the mid-August swing bottom at 1160.37. A daily close above 1214.30 would neutralize the near-term bearish bias and expose the 1235.24-41.64 zone.

Gold Prices Hurt as Fed Outlook Firms, Crude Oil May Be Topping

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are edging lower after producing a Bearish Engulfing candlestick pattern following a challenge of resistance in the 75.00-77.31 area (August 2011 – June 2012 lows). Initial support is seen in the 72.73-88 zone, with a daily close below that targeting the 70.05-26 region next. Longer-term chart positioning warns that a major top may be in the works.

Gold Prices Hurt as Fed Outlook Firms, Crude Oil May Be Topping

COMMODITY TRADING RESOURCES

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

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter