CRUDE OIL & GOLD TALKING POINTS:
- Crude oil prices advance with stocks on hopes for a Brexit accord
- Gold prices retreat as bond yields rise amid broadly risk-on trade
- Optimism might wane as EU negotiators cool breakthrough hopes
Crude oil prices rallied alongside the stocks in the final 48 hours of last week’s trade as Brexit worries eased, triggering improvement in market-wide risk appetite. The move tellingly paced a sharp, broad-based recovery in the British Pound against the spectrum of its G10 FX counterparts.
Bond yields likewise rose as capital poured out of haven-minded Treasuries and priced-in rate cut expectations implied in Fed Funds futures moderated. That understandably weighed on gold prices, tarnishing the appeal of non-interest-bearing and anti-fiat alternatives.
CRUDE OIL PRICES MAY GIVE BACK SOME GAINS AS BREXIT OPTIMISM WANES
The way forward looks less rosy. Sterling fell early Monday after EU negotiators warned that plans put forward by UK Prime Minister Boris Johnson are not adequate to underpin a Brexit deal. The spotlight is now on the Queen, who will open a new session of Parliament with the government’s agenda today.
Trend development may be slow however as the US Columbus Day holiday drains liquidity. Stocks, oil futures and spot gold will continue to trade but the ever-important bond market will close alongside the US government. That might bring down participation and delay any substantive directional progress.
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GOLD TECHNICAL ANALYSIS
Gold prices are trying to make good on a bearish Head and Shoulders (H&S) topping pattern. Follow-through has struggled to materialize thus far. However, the break of a rising trend line set from late May coupled with an emerging series of lower highs and lows seems to keep alive a downward bias. Falling back below the 1480-84.63 area exposes the 1439.14-46.94 region next. Initial resistance is in the 1520.34-35.03 zone.
Gold price chart created using TradingView
CRUDE OIL TECHNICAL ANALYSIS
Crude oil prices hovering near the middle of a familiar range broadly encasing prices since early June. Support is clustered around the $50/bbl figure, with a break below its lower bound at 49.41 on a daily closing basis opening the door for a slide toward three-year lows in the 42.00-43.00 zone. A cluster of back-to-back resistance levels runs up through 60.84, with a breach of that exposing the 63.59-64.43 region.
Crude oil price chart created using TradingView
COMMODITY TRADING RESOURCES
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivak on Twitter