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US Jobs Data May Validate Bearish Crude Oil Price Chart Setup

US Jobs Data May Validate Bearish Crude Oil Price Chart Setup

Ilya Spivak, Head Strategist, APAC

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices may fall as US jobs data validates bearish technical cues
  • Gold prices locked in place on Treasury bond yields, US Dollar divergence
  • Commodities may not do better than standstill into the trading week-end

Another aborted attempt at recovery left crude oil prices little-changed by the close of Thursday’s trading session. Early gains may have reflected digestion of weekly EIA data. While the headline crude inventory rise topped forecasts, gasoline and distillate storage saw sharp drawdowns and measures of implied demand for petroleum-based products edged up overall. ECB-inspired risk aversion saw gains unravel however.

Gold prices marked time in the meanwhile. A dovish message from ECB President Mario Draghi sent EUR/USD sharply lower and stoked global slowdown worries, fueling haven-seeking demand. Taken together, that understandably buoyed the US Dollar. The dour mood also weighed on bond yields however, putting gold’s properties as an anti-fiat and non-interest-bearing asset benchmark at cross purposes.

COMMODITIES MAY NOT MANAGE MORE THAN STANDSTILL ON US JOBS DATA

February’s US employment report now enters the spotlight. A slowdown in job creation is expected but the jobless rate as well as the pace of wage inflation are expected to tick higher. Taken together, that would seem to imply reduced labor market slack that might inspire bets on a less dovish Fed stance than currently accounted for. That bodes ill for gold while oil marks time as the outcome’s supportive implications for demand clash with worries about relatively tighter policy amid a global slowdown.

Recent US data flow has dramatically deteriorated relative to baseline forecasts however, hinting that analysts’ models are overstating the economy’s vigor and opening the door for disappointment. Such a result might furnish fresh fodder for global slowdown fears. In this scenario, it might be crude that finds an unambiguous reason for weakness while gold is held in place as bond yields and the Greenback diverge.

Learn what other traders’ gold buy/sell decisions say about the price trend!

GOLD TECHNICAL ANALYSIS

Gold prices continue to mark time in a choppy digestion range after dropping to a five-week low. Near-term support is at 1276.50, with a daily close below that opening the door for a challenge of the 1260.80-63.76 area. Alternatively, a move back above support-turned-resistance at 1307.32 sets the stage for a retest of a recently broken rising trend line set form mid-November, now at 1330.50.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are struggling to find lasting directional momentum but a bearish Evening Star candlestick pattern along with negative RSI divergence continue to hint that a top is taking shape. A daily close below support in the 55.37-75 area would suggest the uptrend from 2019 lows has ended, setting the stage for resumption of the larger down move from mid-April. The next layer of support lines up in the 50.15-51.33 zone. Alternatively, a rebound above resistance in the 57.96-59.05 region targets the underside of a rising trend line support-turned-resistance, now at 62.31.

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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