Crude Oil Struggles Sub $100 While Gold Bounces Back Ahead of NFP

Talking Points

• Gold bounces back above $1,285 as bears book profits
• Crude oil traders hesitate ahead of critical jobs data
• Copper may continue recovery in absence of weak China data

The precious metals are edging higher in Asian trading today following a jump in the gold price above the key $1,285 mark overnight. Meanwhile, crude oil continues to struggle below the $100 a barrel handle as traders likely hesitate ahead of the critical US jobs figures on Friday.

Precious Metals Recover Ahead of Jobs Data

Gold prices jumped in US trading overnight ahead of the ADP jobs report. The yellow metal had been drifting upward during the European session, which suggests the bears had been looking to book profits on short positions ahead of the fundamental event risk. The precious metal has fallen by over $100 since Mid March as geopolitical tensions in Eastern Europe ease, alongside a drive towards yield plays by investors.

The prospect of a Non-Farm Payrolls reading outside consensus expecations on Friday may prompt further profit taking on gold shorts, and could help the yellow metal recover further in the lead up to the event. However, the bounce-back may prove short-lived given the potential for a strong jobs reading to raise demand for the US Dollar based on implications for Fed policy.

WTI and Copper Continue To Struggle

Similarly, crude oil traders may hold back ahead of Friday’s jobs figures as the commodity continues to flounder below the $100 a barrel mark. This comes despite a report from the DOE overnight that revealed an unexpected drop in inventories which may reflect a lift in demand for the commodity.

Meanwhile, a mixed set of Chinese services index figures released today have failed to spur on the copper bulls. The base metal has recovered by over 4% after hitting the lowest level in more than 3 years in March. Demand for copper has likely returned as concerns over a slowdown in economic growth in China ease. With no major economic data set to be released by the Asian giant over the next week, the absence of negative news-flow could help the commodity to continue its recovery.

CRUDE OIL TECHNICAL ANALYSIS – A Shooting Star candlestick formation on the daily has prompted a quick about-face for crude oil and may be warning of further declines for the commodity. The drop back below the psychologically-significant $100 handle opens up a potential test of the next level of support at $97.40. However a decline in volatility (reflected by the ATR), suggests WTI may be facing a more range-bound trading environment that would limit.

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS – A bearish technical bias for gold is retained given the short-term downtrend remains intact alongside several breaks below important support levels. A retracement to the psychologically-significant level at $1,300 would be seen as an opportunity to enter new short positions.

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS – Silver remains in a short-term downtrend as signaled by prices holding below their 20 SMA. However, the rate of change indicator is beginning to reflect waning downside momentum. Additionally, several Doji candlestick patterns near 19.60 are a signal of hesitation amongst the bears which suggests the potential for a short-term bounce. A retracement back towards resistance at $20.50 would be seen as a new opportunity to enter short positions with a target offered by support at $19.00.

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS– The short-term trend for copper has shifted to the upside as indicated by the 20 SMA and rate of change indicator. However, a Gravestone Doji suggests some hesitation amongst the bulls following a run at the $3.085 mark in recent trading. A retracement back towards key support at $3.00 would be seen as an opportunity to enter new long positions.

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Market Analyst, FXCM Australia

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