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Crude Oil Prices Seesaw as Markets Digest Trade War News

Crude Oil Prices Seesaw as Markets Digest Trade War News

Ilya Spivak, Head Strategist, APAC

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices are seesawing as markets digest trade war news-flow
  • US-China talks are progressing, but a new front may open with the EU
  • Gold prices rise as the US Dollar weakens but chart setup hints at top

Crude oil prices began Friday’s session on the upswing, rising alongside stocks against the backdrop of swelling risk appetite amid hopes for a breakthrough in US-China trade negotiations. The move fizzled midday however, with the WTI contract retracing most intraday gains amid reports that the EU is ready to retaliate against Caterpillar and Xerox if the US moves ahead with auto import tariffs.

Gold prices likewise traded higher. Bond yields fell as news about trade war preparations in the EU hit the wires even as equities celebrated progress on the US-China front. The US Dollar suffered too, seemingly buffeted by both fading haven appeal and diminishing rates support. All that burnished the appeal of non-interest-bearing and anti-fiat assets epitomized by the yellow metal.

US-CHINA TRADE IN FOCUS AS TRUMP DELAYS TARIFF HIKE

Looking ahead, a relatively quiet offering of scheduled event risk is likely to see sentiment trends remain at the forefront. Investors are in a chipper mood after US President Donald Trump announced that the March 1 increase in tariffs on China will be postponed. Bellwether S&P 500 futures are pointing convincingly higher, hinting the risk-on push is likely to find some follow-through.

That probably bodes well for crude oil as long as the improvement in risk appetite manages to sustain momentum. If the US Dollar remains under pressure as support from haven-seeking flows evaporates, gold prices may continue to capitalize. US-China rapprochement may likewise buoy Fed rate hike prospects however, capping the Greenback’s losses and limiting commodity prices’ upside prospects.

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

GOLD TECHNICAL ANALYSIS

Gold prices are menacing support underpinning the uptrend from mid-November after an expected pullback from critical resistance in the 1357.50-66.06 area. The appearance of a bearish Evening Star candlestick pattern coupled with dramatic negative RSI divergence hints that a top may be taking shape. A daily close below 1249.10 – the lower bound of a dense support cluster – may serve as confirmation and open the door for a test of 1276.50 next. The February 20 high at 1346.75 is nominal resistance but making the case for upside follow-through absent a close above 1366.06 seems difficult.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices put in a Shooting Star candlestick below resistance in the 57.96-59.05 area, implying indecision that might precede a turn lower. The appearance of negative RSI divergence bolsters the case for a reversal. A break below resistance-turned-support at 55.75, the February 4 high, exposes the 50.15-51.33 zone. Alternatively, a daily close above 59.05 sets the stage for a retest of former support guiding the uptrend from February 2016, now at 61.84.

Crude oil price chart - daily

COMMODITY TRADING RESOURCES

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

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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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