Market analysis

Week 20 data: Oil and Gold: Price review for the week ahead

By Antreas Themistokleous

13 May 2024

exness-oil-gold-3 [dark]

This preview of weekly data examines USOIL and XAUUSD where upcoming economic data later this week are the main market drivers for the near-term outlook.

Top news coming up includes British Unemployment, the US inflation rate, and Chinese industrial production.

Tuesday:

British unemployment at 06:00 AM GMT for March is expected to increase to 4.3%, with the number of claimants projected to rise to 13,900 for April, up from the previous 10,900. US Producers Price Index (PPI) at 12:30 GMT. Market participants anticipate the figure to be 2.2%, up from 2.1% previously. If confirmed, this could hint at a lower inflation figure in upcoming months.

Wednesday:

US inflation rate at 12:30 PM GMT is expected to drop to 3.4% from 3.5%, with core inflation predicted to decrease by 0.2% for April. Inflation data is currently crucial, as expectations for a Federal Reserve rate cut continue to be postponed. A worse-than-expected figure could further delay these expectations, while a lower inflation figure might enhance the probability of an earlier rate cut by the Fed.

Friday:

Chinese industrial production at 02:00 AM GMT. Market expectations are for a 0.1% increase to 4.6%. If accurate, this could lead to gains in production-related instruments like crude oil, silver, and copper.

USOIL, daily:

Oil prices have declined due to weak fuel demand and concerns that US interest rate cuts will remain unchanged for most of the year, impacting the largest global economy. The global economic outlook and sluggish business demand in China, following the publication of the producer's price index last week, contributed to the price decline.

Expectations of extended supply cuts by OPEC+ and a reduction in the US oil rig count, which dropped to 496 reaching the lowest level since November, indicate reduced drilling activity affecting supply. Additionally, the failure to reach a ceasefire agreement in the Middle East maintains high volatility in the oil market, resulting in sharp movements on the daily chart.

On the technical side, the price has found significant support at the 61.8% Fibonacci retracement level and is currently holding around the $78 (USD) price area, which has been a reactive area since mid-March. The Bollinger bands remain expanded, indicating continued market volatility for crude oil, while the faster moving averages of 20 and 50-day are trading above the slower 100-day average, supporting the overall bullish momentum. 

The Stochastic oscillator is in the extreme oversold level, suggesting there might be room for a continued upward move in upcoming sessions. If this scenario is confirmed, the first potential resistance area might be around the $80 level, which represents a psychological resistance and is just above the 50% Fibonacci retracement level.

Gold-dollar, daily:

Gold prices have fallen from a two-week high as investors await key US inflation reports to gauge the timing of the Federal Reserve's rate cut. Increased expectations for rate reductions have emerged following a softer-than-expected US payrolls report for April and a weak jobs report last week. Lower interest rates could reduce the opportunity cost of holding gold, but varied comments by Fed officials and a jump in consumers' inflation expectations could complicate the outlook. Currently, the probability of a rate cut is expected in September according to the Fedwatch tool, but this projection could rapidly change depending on this week's inflation data release.

From a technical perspective, the aggressive rally in gold prices has slowed after encountering resistance around the $2,360 area. The price is currently trading above all moving averages, but the current session is bearish, making it interesting to see the closing price today. The Stochastic oscillator is near the extreme overbought level, indicating that a correction to the downside might be the dominant scenario in the coming days, while the Bollinger bands have slightly contracted, showing that market volatility for gold is low.

On the other hand, the faster moving averages are trading well above the slower one, validating that the overall bullish momentum is still in play, at least for now. In the event of a correction to the downside, the first major technical support area might be found around the $2,300 price area, which includes the 23.6% daily Fibonacci retracement level, the 50-day moving average, the lower Bollinger band, and the psychological support of the round number.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Antreas Themistokleous
Antreas Themistokleous

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.