The dollar rally overnight saw modest only modest falls by Brent crude and WTI, which can probably thank lower than expected official US crude inventories for limiting the damage. Brent crude fell 0.84% to USD55.55 a barrel, and WTI fell only 0.24% to USD52.60 a barrel. Both contracts are unchanged in the Asian session.
Oil rallied back quickly from its intra-day lows overnight, suggesting that there is plenty of physical buying interest even at these levels. That is in keeping with the Asian recovery and its correlation to very high Asian gas prices at the moment. If the US dollar continues to rally, nerves increase about the US recovery pace, and equity markets fall further, then oil prices will face further downside pressure. The price action overnight, though, suggests any steep falls will be short-lived.
Brent crude is bound by resistance at USD56.60 and USD57.40 a barrel, with support at USD54.50 a barrel. WTI has resistance at USD54.00 a barrel, and support at USD51.60 a barrel. Clearance of those levels, either way, will signal oil’s next directional move.
Although gold fell overnight with equity markets, and in the face of a stronger US dollar, its fall was modest. Gold fell just 0.34% to USD1844.50 an ounce, edging another 0.53% lower to USD1837.60 an ounce in Asia this morning.
Bullish gold traders can take some heart from the price action of the last 24 hours, however. Gold performed much better overnight in the face of a sharp fall in equity markets than it has for many a month. That suggests that gold is benefitting from some haven demand, boosted by US yields moving slightly lower overnight.
