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Crude Oil Prices May Be Plotting a Return to $40/Barrel WTI

Crude Oil Prices May Be Plotting a Return to $40/Barrel WTI

Ilya Spivak, Head Strategist, APAC

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices rebuild link with broader sentiment trends
  • Technical setup hints a test above $40/bbl might be ahead
  • Gold prices edge down, struggle to make good on breakout

Crude oil prices edged up against the backdrop of a cautious improvement in risk appetite at the beginning of the trading week. The WTI benchmark paced a rise in S&P 500 index futures. The correlation between the two has been rebuilding recently, suggesting that idiosyncratic factors – notably, the recent struggle to extend the OPEC+ output cut scheme – are giving way to broader sentiment as the main driver of price action.

Gold prices likewise echoed the broader market mood. The metal inched lower as Treasury bond futures flagged higher yieldsagainst the risk-on backdrop, undermining the appeal of non-interest-bearing assets.

On balance, this seems to set the stage for sentiment to continue to drive. A dearth of noteworthy event risk hints that the pro-risk tilt already in play faces relatively few discernible roadblocks, opening the door for follow-through. True trend development may prove elusive howeveras news-flow dries up and volumes dwindle in thin holiday trade. Pace-setting markets in the UK and the US will remain shuttered.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are consolidating gains after clearing resistance at 32.81, the 50% Fibonacci retracement. This level has held up to being retested as support, suggesting the next move might be a further foray to the upside. Resistance is in the 40.56-42.40 area, with a daily close above that exposing former support clustered around the $50/bbl figure. A turn back below the 38.2% Fib at 25.07 is probably a prerequisite for neutralizing immediate upward pressure.

crude oil price chart - daily

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices are struggling to find upside follow-through after breaking out of a bullish Symmetrical Triangle pattern. Negative RSI divergence suggests upside momentum is ebbing, which may set the stage for a reversal lower. Taking out minor support at 1715.15 exposes a seemingly more durable barrier at 1679.81, followed by the 38.2% Fibonacci retracement at 1645.40. Invalidating topping cues probably requires a daily close above the May swing top at 1765.30.

Gold price chart - daily

Gold price chart created using TradingView

COMMODITY TRADING RESOURCES

--- Written by Ilya Spivak, Head APAC Strategist for DailyFX

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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