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Oil takes pause from slide, gold eyes NFP

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Oil steadies after third day of losses

Oil took its losses for the week to more than 7% on Wednesday, with the latest fall from grace coming as risk assets sold off on hawkish Fed commentary and the strong ISM data. A surprising inventory build of 3.6 million barrels compounded the negativity for crude and saw WTI fall back below USD 70 and Brent may not be far behind it.

The fundamentals continue to look favourable for oil in the longer run but a combination of negative factors are taking their toll as WTI flirts with seven-year highs. The last time oil came under heavy selling pressure was just a few weeks ago and it saw some strong support not far from the levels it’s currently trading around.

ISM spoils the party for gold

The ADP report offered such promise for gold prices on Wednesday. Falling well short of expectations and potentially setting us up for a below-par jobs report on Friday, gold broke higher after another period of consolidation and once again found itself running into a brick wall around USD Feder1,833, an increasingly significant level of resistance.

The ISM report spoiled the party for the yellow metal, with higher yields and a stronger dollar delivering a major blow to its breakout prospects and forcing it back to the levels it traded at prior to the ADP release. With more Fed speak today and an increasingly important jobs report tomorrow, things could get more lively for gold prices.

The comments coming from various Fed officials gives the impression that the balance of power is falling in favour of the hawks, something a strong jobs report will only accelerate. This doesn’t bode well for gold, despite the technical picture continuing to look bullish. A big couple of days ahead.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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