Oil and Gold feel US Dollar heat

Oil falls on stronger US Dollar. 

It was a tough night for commodities in general overnight. Base metals fell, with aluminium giving back much of its Guinea gains. With New Yorkers concerned about US growth to start the week, leading to haven US Dollar strength, oil prices also wilted. Brent crude eased by 0.80% to $71.50, and WTI fell by 0.70% to $68.30 a barrel.

Both contracts have added 10 cents a barrel in a quiet Asia session, and in the overall context, the scale of the overnight oil price retreats was relatively modest at just over 50 cents a barrel. Oil’s short term direction will be dictated by what sort of mood New York arrives in this evening, as nothing has materially changed in the markets this week. Although admittedly, oil’s rally had looked like running low on momentum last week, even as the US Dollar sagged. The slowing of upward momentum after the US data, economic recovery doubts and US Dollar strength had raised the odds of a deeper downward price move. 

Brent crude has double tops at $72.80 and $73.70 a barrel. Support is nearby at $71.25, the 100-DMA, and $70.50 a barrel. That could lead to a test of $70.00 a barrel, and failure will likely trigger stop-losses in volume. The ensuing spike lower would be, once again, a buying opportunity. 

WTI closed below its 100-DMA overnight, today at $68.75, which now forms initial resistance. That is followed by $69.50 a barrel. Support lies at $67.70 and $67.00 a barrel. If WTI fails at $67.00, a deeper and more aggressive capitulation could occur. But like Brent, it is probably a dip for the brave to buy into.

Gold tumbles on US Dollar strength.

Gold has been warning for several days that its upward momentum had waned materially and that its rally was in trouble. Notably, in previous sessions, gold had been unable to rally on US Dollar weakness. Overnight, a slight rise in US yields and a severe bout of US Dollar strength set the downward correction in motion. Gold finished the overnight session 1.60% lower at $1794.00 an ounce.

Gold looks highly vulnerable to further US Dollar strength this evening. Although some short-covering has lifted gold slightly higher to $1797.50 an ounce in Asia, it looks like a dead cat bounce. Should the US Dollar fall by chance tonight and gold not rally still, the outlook will become darker still.

Gold has nearby resistance at $1800.00, followed by the 100 and 200-DMAs at $1809.50 and $1815.65 an ounce. Support is at $1792.50, followed by $1780.00 an ounce. If $1780.00 fails, gold could fall to $1750.00 an ounce.

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