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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices may retreat after potent rise as market mood sours
  • Cautious RBA, soft US durables data might spur global growth fears
  • US Dollar might derail gold’s ability to capitalize on risk-off trade

Crude oil prices rose alongside stocks as risk appetite firmed across financial markets. The upbeat mood began with firm Chinese PMI data released over the weekend and found reinforcement in better-than-expected US manufacturing ISM print.

Markets conveniently overlooked a raft of soft European releases and disappointing US retail sales numbers. That might have reflected start-of-quarter portfolio allocation flows. The risk-on push did meet resistance once another round of indicative Brexit votes proved to be inconclusive however.

Gold prices edged lower as the firmer ISM print and subsequent Brexit-linked GBP/USD drop sent the US Dollar broadly higher, undermining the appeal of anti-fiat alternatives. A sentiment-driven rise in bond yields did not help, tarnishing the appeal of non-interest-bearing assets.

CRUDE OIL MAY RETREAT AS SENTIMENT SOURS, API DATA DUE

Looking ahead, a cautious tone from the RBA and a soft US durable goods orders reading might revive global slowdown worries. If that sours sentiment, crude oil is likely to be among the assets on the defensive. Gold’s ability to capitalize will reflect the clash between lower yields and a stronger Greenback.

Treasury bonds and the benchmark currency tend to attract haven-seeking capital flows at times of market stress. That tends to push rates downward – which is supportive for the non-yielding yellow metal – while a stronger US unit applies pressure in the opposite direction.

Weekly API oil inventory data is also on tap. It will be judged against projections calling for a modest 725k barrel drawdown to be reported in official EIA statistics Wednesday. A larger outflow may be price-supportive while a smaller one – or even a surprise build – might inspire weakness.

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

GOLD TECHNICAL ANALYSIS

Gold prices are stalling above the would-be neckline of a bearish Head and Shoulders topping pattern. The setup would be confirmed on a daily close below this barrier, now at 1282.83. Doing so would initially expose the 1260.80-63.76 area but set the stage for a larger decline toward the $1200/oz figure. Alternatively, a reversal back above the 1303.70-09.12 zonesees the next layer of resistance at 1326.30.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices pushed upward, taking out resistance marked by the 38.2% Fibonacci expansion at 60.45. Buyers now aim to challenge the 50% level at 62.28, with a close above that targeting the 63.59-64.43 area next. Alternatively, a move back below 60.45 – now recast as support – puts the 57.24-88 zone in the crosshairs.

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