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Near-Term Crude Oil Price Gains May Fizzle as Chart Hints at Top

Near-Term Crude Oil Price Gains May Fizzle as Chart Hints at Top

Ilya Spivak, Head Strategist, APAC

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices may rise in risk-on trade, but chart warns of topping
  • Market sentiment buoyed by reports of imminent US-China trade deal
  • Gold prices collapse through support, breaking four-month uptrend

Crude oil prices fell amid broad-based risk aversion triggered by disappointing US economic data, with the WTI benchmark tracking the bellwether S&P 500 stock index lower. Shares would later recover on the back of supportive news form Apple and Amazon but oil remained near intraday lows into the close.

Seesawing sentiment proved to be doubly negative for gold prices. The metal accelerated lower as the risk-off push drove haven-seeking capital flows into the US Dollar, curbing anti-fiat demand. The subsequent tech-driven recovery bid up bond yields, undermining the appeal of non-interest-bearing assets.

CRUDE OIL MAY FIND LIFELINE AS MARKET RISK APPETITE RECOVERS

A risk-on mood seems to be prevailing in early Asia Pacific trade on Monday. US President Trump talked down rate hikes and said the Greenback is “too strong” at the CPAC conference, various reports claimed a US-China trade deal may be imminent, and a Brexit breakthrough may be taking shape.

US stock index futures are pointing convincingly higher, hinting the chipper mood has scope for follow-through. A timid data docket offers little to derail momentum. Crude oil may find a lifeline if sentiment holds up. Gold might have scope for corrective gains absent fresh fodder shaping Fed policy bets.

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

GOLD TECHNICAL ANALYSIS

Gold prices marked a top below $1350/oz, as expected. A sharp drop through chart support has punctured the rising trend from mid-November as well as a dense inflection area running through 1249.10. Sellers now aim to challenge 1276.50, with a break below that exposing the 1260.80-63.76 area. Alternatively, a reversal back above 1307.32 – the upper layer of former support – opens the door for a retest of a broken rising trend line at 1323.43.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices put in a bearish Evening Star candlestick pattern, hinting a top is taking shape. Negative RSI divergence bolsters the argument for weakness. A daily close below support in the 55.37-75 area would break the uptrend from late-December lows and expose the 50.15-51.33 zone. Alternatively, a breach of resistance in the 57.96-59.05 region targets trend line support-turned-resistance from February 2016, now at 62.10.

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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