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Crude Oil Prices at Risk on German IFO, US Consumer Confidence

Crude Oil Prices at Risk on German IFO, US Consumer Confidence

2019-09-24 04:00:00
Ilya Spivak, Head Strategist, APAC
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CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices seesaw on Eurozone and US PMIs, Draghi comments
  • Gold prices rise as bond yields fall but chart setup still looks ominous
  • German IFO, US consumer confidence reports may sour risk appetite

Crude oil prices mirrored stocks’ seesaw ride yesterday. The WTI contract plunged alongside shares and bond yields as dismal Eurozone PMI data stoked global slowdown fears. Calls for highly accommodative policy from ECB President Mario Draghi and firm US PMI data underpinned a recovery in the second half of the day however, leaving both oil and US equity benchmarks close to flat by day’s end.

Bond yields also recovered, but the rebound was more modest, leaving the bellwether 10-year lending rate lower heading into Tuesday’s opening bell on APAC bourses. This meant that gold prices not only found fuel for intraday gains but also managed to sustain them. Lower rates are typically supportive on a relative basis for the non-interest-bearing precious metal.

GERMAN IFO, US CONSUMER CONFIDENCE DATA MAY HURT CRUDE OIL PRICES

Looking ahead, Germany’s IFO survey of business confidence may spook investors if the results echo disappointing trend in recent news flow, as with yesterday’s PMI roundup. An upside surprise on US consumer confidence figures – another extension of recent trends in the performance of economic statistics relative to baseline forecasts – that cools Fed rate cut hopes may amplify any risk-off tilt.

That seems to bode ill for cycle-sensitive crude oil prices, though API inventory flow data might muddy the waters somewhat. The release will be sized up against expectations of a narrow 79k-barrel build expected to appear in official EIA figures due Wednesday. Gold may find it difficult to truly capitalize however if worries about higher-than-desired rates are at least in part the catalyst for investors’ displeasure.

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GOLD TECHNICAL ANALYSIS

Gold prices continue to build out what looks to be a Head and Shoulders (H&S) topping pattern. Confirmation on a daily close below 1480.00 implies a drop through support in the 1437.70-52.95 to challenge the $1400/oz figure. Alternatively, a daily close above 1523.05 targets the weekly chart inflection level at 1563.00.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to idle at resistance-turned-support in the 58.03-76 area. Breaking below that on a daily closing basis exposes seven-week rising trend support at 54.83. Alternatively, a push back above 60.84 sets the stage to challenge April’s swing high at 66.60 once again.

Crude oil price chart - daily

Crude oil price chart created using TradingView

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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