Oil
Crude prices got an unexpected boost from a surprising Bank of Japan decision to shift their policy which sent the dollar tumbling. Oil should be higher, but China’s COVID surge has energy traders refraining from betting on a quick complete reopening. The oil market has tremendous support at the $70 level as the US will likely be refilling the Strategic Petroleum Reserve for a while.
The outlook for China’s crude demand will hinge on how quickly China can bolster up its health care system and over how bad this wave gets. It is hard to believe that if the COVID situation deteriorates much worse than feared that Beijing might have to deliver a U-turn over its policy.
Gold
Gold got an unexpected present from the Bank of Japan. Gold is benefitting from a weaker dollar after the BOJ tweaked their curve policy, which signaled they are nearing the end of its ultra-easing monetary policy stance. It is rare to see gold perform so well when global bond yields are surging, but this widening of Japan’s yield curve band signifies that we could have a peak in the dollar put in place.
The dollar might be in the house of pain for a while and that should be good news for bullion. Holiday trading volumes might disrupt this rally but for now it seems like gold has definitely got its groove back.
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Ed Moya
His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies.
Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news.
Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal.
Ed holds a BA in Economics from Rutgers University.
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