GOLD & CRUDE OIL TALKING POINTS:
- Crude oil prices continue to close weekly open gap, ignore FOMC
- Gold prices down as cautious Fed disappoints ultra-dovish markets
- Stock futures signal risk-off bias as markets digest Fed rates view
Crude oil prices continued to drift lower yesterday, overlooking fireworks linked to the FOMC rate decision to focus on working down the dramatic upward gap at the weekly trading open. The moderation seems to reflect Saudi Arabia’s successful effort at mollifying supply disruption fears after an attack on its energy infrastructure over the weekend threatened a hefty 5 percent of global output.
Meanwhile, gold prices were understandably pulled into the Fed’s orbit. The metal fell as the US central bank underwhelmed the markets’ ultra-dovish outlook, as expected. The central bank issued a rate cut as widely projected but offered circumspect guidance on where it will take policy from here. Markets are pricing about one more cut this year than the Fed has signaled in 2019, and nearly three more in 2020.
CRUDE OIL PRICES MAY FALL AS MARKETS DIGEST FOMC RATE DECISION
Looking ahead, policy announcements from the Swiss National Bank (SNB) and the Bank of England (BOE) may pass without fireworks. The former might have been expected to top up stimulus to limit the downside for EUR/CHF since the ECB re-started QE, but Euro gains in the aftermath of that decision make such an adjustment seem unnecessary for now. The BOE remains hamstrung by Brexit uncertainty.
This puts sentiment trends at the forefront. Bellwether FTSE 100 and S&P 500 stock index futures are pointing substantively lower before London and North America come online, speaking to lasting disappointment with the Fed’s guarded take on further easing. This bodes ill for sentiment-linked crude oil prices. Gold may struggle too despite a risk-off tilt since higher rates are behind the markets’ defensive posture.
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GOLD TECHNICAL ANALYSIS
Gold prices continue to trace out what might turn out to be a bearish Head and Shoulders (H&S) chart formation. Confirmation on a daily close below 1480.00 would imply a measured move through interim support in the 1437.70-52.95 on route to test the $1400/oz figure. Alternatively, push above resistance at 1523.05 puts the weekly chart inflection level at 1563.00 back in play.
Gold price chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices continued to erase explosive gains registered earlier in the week. A daily close back below the September 10 swing top at 58.76 puts trend support set from early August back in focus. Breaking this barrier – now at 54.39 – opens the door to test pivotal support near the $50/bbl figure. Recovering back above the 60.04-84 zone seems like a prerequisite for a meaningfully constructive outlook.
Crude oil price chart created using TradingView
COMMODITY TRADING RESOURCES
- See our guide to learn about the long-term forces driving crude oil prices
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- Join a free webinar and have your commodity market questions answered
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter
