Week 35: oil and gold technicals
By Antreas Themistokleous
01 September 2023
Crude Oil (USOIL)
Oil prices rose on Monday after China announced measures to boost its struggling economy, including halving stamp duty on stock trading. Investors, however, remained concerned about the pace of economic growth and the impact on oil demand of further US interest rate hikes. The market also kept an eye on Tropical Storm Idalia and its potential impact on oil and gas production in the US Gulf.
Despite concerns, falling oil inventories and supply cuts from OPEC+ have kept oil prices above $80 USD a barrel. Saudi Arabia is expected to extend its voluntary oil output cut of 1 million barrels a day into October to further support the market.
From the technical viewpoint, the price is currently trading where the 23.6% of the daily Fibonacci retracement level and the 20-day moving average are. The 50-day moving average is trading well above the 100-day moving average, indicating that the overall bullish trend is still in effect.
If the current area is proven to be a strong resistance and the price resumes the most recent bearish trend, then $77.80 is the major technical support level consisting of the 38.2% daily Fibonacci retracement level, the lower Bollinger band as well as the 50-day moving average.
Gold prices rose on Tuesday as the recent rally in the US dollar and Treasury yields showed signs of slowing down. This comes ahead of crucial inflation and jobs data that could impact interest rates. The weaker dollar and lower Treasury yields make gold more attractive to investors. Fed Chair Jerome Powell's comments at the Jackson Hole symposium about the fight against inflation have also contributed to increased demand for gold.
US economic data to be released this week, including the PCE price index and non-farm payrolls report, will be closely watched and will most probably create volatility amongst all US dollar pairs. If rates remain high, consumer spending is likely to decline, leading to lower bond yields, a weaker dollar, and a potential rebound in gold prices.
According to technical analysis, the price rebounded from the psychological support of the $1,890 level and is currently in a correction move to the upside. At the time of writing, price is facing strong resistance around the $1,920 area, corresponding to 38.2% of the daily Fibonacci retracement level. While the Stochastic oscillator is in the extreme overbought level, indicating that a correction to the downside might be possible in the near short term.
In the event that the price continues its correction to the upside, we might see the first point of major resistance around $1,930, which consists of 50% of the Fibonacci retracement level, the 50-day moving average, as well as the downward trendline.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.
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