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Crude Oil Prices at Risk on US CPI and EIA Inventory Data

Crude Oil Prices at Risk on US CPI and EIA Inventory Data

Ilya Spivak, Head Strategist, APAC

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices fall as US President Trump stokes trade war worries
  • Gold prices might be carving out a double top below $1400/oz figure
  • US CPI and EIA inventory flow statistics might inspire risk aversion

Crude oil prices fell alongside stocks as US President Donald Trump stoked trade war fears, weighing on market-wide risk appetite. The self-styled “tariff man” said the Euro is devalued against the US Dollar, once again hinting that tensions with the currency bloc may be on the horizon.

Mr Trump also claimed that there is more to his agreement on immigration with Mexico than has been publicly revealed, which the government there has forcefully denied. The White House aborted a tariff hike on Mexican imports planned for earlier this week, citing a would-be breakthrough.

Finally, the President revealed that he is the impediment to US-China trade agreement. “Its me...holding up the deal [and] we’re either going to do a great deal with China or we’re not going to do a deal at all,” he said. In all, the comments were understandably worrying for already shell-shocked investors.

Gold prices were on the defensive courtesy of a rise in bond yields ahead of Mr Trump’s comments, but the subsequent risk-off pivot capped the move lower. The metal launched higher as borrowing costs drifted downward and the US Dollar softened as Fed rate cut speculation perked up anew.

US CPI, EIA INVENTORY FLOW MIGHT HURT CRUDE OIL PRICES

From here, US CPI data is expected to show that headline inflation cooled a bit in May, ticking down from 2.0 to 1.9 percent. A soft result may nominally amplify Fed rate cut bets, but the markets’ already dramatically dovish stance seems to leave relatively little room for the outlook to shift in that direction further.

With that in mind, a soft result might have greater market-moving potential as a risk-off catalyst, speaking to slowing global growth. That might weigh on sentiment-geared crude oil prices and boost haven demand for the US Dollar, keeping gold from capitalizing as bond yields fall further.

EIA inventory data might compound oil’s troubles. Expectations envision a narrow drawdown, but leading API data called for a 4.85-million-barrel rise yesterday. The EIA cut its 2019 oil price forecast even as it downgraded output estimates in a report published yesterday, citing weaker demand prospects

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

GOLD TECHNICAL ANALYSIS

Gold prices put in a bearish Evening Star candlestick pattern on a test of resistance marked by February’s swing highat 1346.75, hinting that a double to may be in the works. Breaking below support in the 1323.40-26.30 area on a daily closing basis targets the 1303.70-09.12 zone next. Alternatively, a rebound through 1346.75 opens the door for a test of trend-defining resistance in the 1357.50-66.06 region.

Gold price chart - daily

CRUDE OIL TECHNICAL ANALYSIS

An expected bounce in crude oil prices ran out of steam on a test of resistance at 55.75. Downside follow-through that leads below near-term support in the 50.31-51.33 area sets the stage to challenge the bottom in place from September 2016 in the 42.05-43.00 zone. Alternatively, a turn up through resistance 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

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

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