Crude Oil Prices Struggle Despite Market Cheer, Gold Aims Lower

CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices struggle to build higher despite risk-on backdrop
  • Gold prices look poised to test below $1700/oz as breakout fizzles
  • US-China tensions, EU Commission recovery fund pitch in focus

Crude oil prices remain in stasis. The WTI benchmark has idled near the $34/bbl figure for the better part of a week. Traders are weighing improving risk appetite – celebrating the Fed’s success in easing credit market stress as well as easing coronavirus lockdowns around the world – with the onset of a deep recession that undermines demand.

The chipper mood buoyed Treasury bond yields as capital poured out of the safety of government debt, weighing on gold. This often happens when a rising baseline for market rates of return highlights gold’s non-interest-bearing character. Pressure was offset by US Dollar weakness early in the trading day but that resilience soon gave way.

Looking ahead, a relatively quiet offering on the economic data docket is likely to keep broader sentiment trends in control. Traders will weigh the risk-off implications of escalating US-China tensions against hopes for a rebound in economic activity as economies cautiously reopen. The EU Commission will unveil is regional recovery fund. How markets greet its size and composition may likewise color the risk landscape.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to mark time above the 50% Fibonacci retracement at 32.81. Upward resumption from here targets resistance in the 40.56-42.40 area, with a break above that clearing the way for a retest of former support near the $50/bbl figure. A turn lower that puts prices back under the 38.2% Fib at 25.07 seems like a prerequisite for neutralizing the near-term bullish bias.

Crude oil price chart - daily

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices slipped past support at 1715.15, suggesting the bullish implications of a recently completed Symmetrical Triangle pattern are unraveling. Negative RSI divergence bolsters the case for topping. From here, a daily close below 1679.81 exposes the 38.2% Fibonacci retracement at 1645.40. The May swing top at 1765.30 continues to mark defining resistance.

Gold price chart - daily

Gold price chart created using TradingView

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— Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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