CRUDE OIL & GOLD TALKING POINTS:
- Crude oil prices down other cyclical commodities and stocks in risk-off trade
- Returning global recession fears might be driving renewed liquidation sweep
- Gold prices down with stocks as haven-seeking capital flows boost US Dollar
Crude oil prices tumbled amid a broad risk-off turn across financial markets at the start of the trading week. Stocks fell on Asia-Pacific bourses. Other cycle-sensitive commodities – like copper and natural gas – likewise fell, as did similarly-minded currencies.
Curiously, gold prices fell alongside risky assets. That could reflect gains in the US Dollar, which may have undermined the appeal of anti-fiat alternatives. The Greenback’s unrivaled liquidity often makes it a beneficiary of haven-seeking capital flows.
A sudden spike in Covid-19 cases in Beijing was cited as a catalyst in the newswires. This surely didn’t help, but it seems a stretch to flag it as the catalyst considering that news was reported long before the first big wave of selling hit around 3:30-4:00 GMT.
In fact, that timeline seems in line with the daily reopening of trade in Tokyo after the lunchtime break. As it happens, Japanese shares suffered outsized losses relative to regional counterparts. Industrials, consumer discretionary and tech sector shares seemed to drive the selloff.
On balance, this gives price action a cyclical appearance, suggesting that liquidation may reflect the return of global recession fears. Bellwether S&P 500 stock index futures are pointing sharply lower ahead of the opening bell on Wall Street, warning that de-risking is likely to continue.
Recommended by Ilya Spivak
Get Your Free Oil Forecast
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices edged lower after producing a bearish Dark Cloud Cover candlestick pattern, with sellers now menacing support at 34.78. A daily close below that exposes the 27.40-29.11 inflection zone. Near-term resistance is in the 42.40-43.88 area. Breaking above that likely puts the $50/bbl figure in the crosshairs.
Crude oil price chart created using TradingView
GOLD TECHNICAL ANALYSIS
Gold prices continue to idle near the middle of a choppy range containing them since mid-April. Resistance is marked by the May 18 highat 1765.30. Support is in the 1679.81-93.92 area, with a break below that on a daily closing basis probably exposing the 38.2% Fibonacci retracement at 1645.40 next.
Gold price chart created using TradingView
Recommended by Ilya Spivak
Get Your Free Gold Forecast
COMMODITY TRADING RESOURCES
— Written by Ilya Spivak, Head APAC Strategist for DailyFX
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter