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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices sink to five-month low as US inventories swell
  • Gold prices seesaw on conflicting cues from US economic data
  • ECB rate decision, Xi comments on US-China trade war eyed

Crude oil prices fell again after a brief respite, hitting a five-month low. The selloff followed EIA inventory flow data that revealed an unexpectedly large 6.77-million-barrel build in US inventories. Economists were looking for a 1.56-million-barrel draw ahead of the release. Leading API data foreshadowed a rise, albeit a more modest one at 3.55 million barrels.

Meanwhile, gold prices seesawed amid conflicting cues for Fed rate cut bets from US data flow. The metal soared to a four-month high after ADP jobs data suggested the world’s largest economy added a meager 27k jobs last month. The service-sector ISM survey then catalyzed reversal, showing activity growth unexpectedly accelerated to the fastest pace in three months.

CRUDE OIL, GOLD PRICES MAY DIVERGE ON ECB RATE DECISION, XI SPEECH

Looking ahead, an ECB policy decision is in focus, with traders keen for guidance on the likely path for interest rates and the specifics of the upcoming third round of TLTRO bank liquidity injections. Regional growth has stabilized a bit in recent months but remains near the weakest levels in six years. With that in mind, markets are probably primed for a dovish tilt in official messaging.

The notoriously slow-moving central bank’s boldness in stimulus provision is likely to be most important for commodity prices. Investors are pining for support amid a broadening global slowdown, so an offering deemed generous may boost risk appetite and lift sentiment-geared crude oil prices. It may likewise hurt the Euro however, with resulting EURUSD drop echoing as broader Dollar strength that weighs on gold.

Alternatively, a risk-off mood might prevail if the central bank appears to be holding back. That could see oil tracking lower alongside stock prices. The implications for gold may be inverted too. If the ECB seems less inclined toward dovish fireworks than what the markets now expect from the Federal Reserve, a rise in EURUSD with broader negative knock-on effects on the Greenback might lift the yellow metal.

An upcoming speech from Chinese President Xi Jinping at the St. Petersburg International Economic Forum might be formative as well. The address will mark the first opportunity to opine publicly since the latest round of escalation in the US-China trade war. Combative rhetoric echoing the recent pivot in chatter emanating from Beijing might spook the markets, nudging markets to the risk-off side of the sentiment spectrum.

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices cleared resistance in the 1323.40-26.30 area but a demonstrative long wick ahead of the late-February swing top at 1346.75 may hint at exhaustion, warning that a double top is in the works. Turning back below 1323.40 targets the 1303.70-09.12 zone. Alternatively, a break of 1346.75 eyes trend-defining resistance in the 1357.50-66.06 region next.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices edged down to support in the 50.31-51.33 area but fell short of an outright breakdown. Confirming a breach on a daily closing basis may set the stage for a test of support set from September 2016 in the 42.05-43.00 zone.Alternatively, a move back above 55.75 exposes the 57.24-88 region next.

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