Article by: ETO Markets
The US oil market showed mixed signals as a decrease in active oil rigs and consecutive drawdowns in oil inventories indicated a tight market, potentially supporting prices. Meanwhile, US sanctions on Russian oil entities and vessels are expected to strain global supply chains, creating upward pressure on prices as exports shift to meet strong Indian and Chinese demand. Contrasting oil demand forecasts from OPEC and IEA revealed optimism for robust growth by OPEC, driven by transportation fuels and air travel, while IEA's moderated outlook still pointed to healthy demand. Additionally, the fragile ceasefire deal between Israel and Hamas, though uncertain in enforcement, could influence oil prices; successful implementation might ease market concerns, whereas its failure could reignite worries, pushing prices higher.
In the precious metal market, gold prices have entered a bullish consolidation phase, with a potential near-term correction before resuming their uptrend toward all-time highs of $…. Stronger-than-expected Q4 GDP growth of 5.4% from China, along with better-than-forecast Retail Sales and Industrial Production data, failed to inspire the metal, as concerns over China’s property market and US tariff proposals weighed on optimism. However, dovish expectations for two Federal Reserve interest rate cuts this year, driven by tame December inflation data, mixed US Retail Sales, disappointing Initial Jobless Claims, and Fed Governor Waller’s remarks on potential early-year rate cuts, have supported gold prices by pressuring US Treasury yields and the US Dollar. Upcoming US housing and Industrial Production data, along with profit-taking flows, could influence gold price movements in the near term.
Gold prices (XAU/USD) remain in a bullish consolidation phase near $…, supported by expectations of further Federal Reserve rate cuts this year following signs of abating inflation, which have pressured US Treasury yields and the US Dollar. Fed Governor Christopher Waller’s remarks on potential rate cuts and weaker US labour market data added to the metal's appeal. However, easing concerns about US President-elect Trump’s trade tariffs, the Israel-Hamas ceasefire deal, a modest USD recovery, and speculation of a Bank of Japan rate hike next week cap Gold’s upside. Despite these headwinds, XAU/USD is poised for a third consecutive weekly gain as traders await US housing and industrial production data for further direction.
From a technical standpoint, Gold's daily chart displays positive oscillators, favouring bullish traders and suggesting potential for further gains. However, sustained strength above the $…-$… supply zone is needed to confirm a bullish breakout. If cleared, Gold could target $…, followed by $…-$…, and potentially challenge the all-time high of $… from October 2024. On the downside, initial support lies at $…-$…, with further pullbacks likely to attract buyers near $…-$…. A breach below this pivotal zone could expose Gold to the $… level, with $…—bolstered by the 100-day EMA and a short-term ascending trendline from November lows—serving as a critical confluence area to limit deeper corrections.
West Texas Intermediate (WTI) crude oil is trading near $…, edging lower due to easing geopolitical tensions after reports of a potential halt to Houthi militia attacks in the Red Sea and the Gaza ceasefire deal. This has reduced the security premium on oil prices. Strong US Retail Sales data has highlighted resilient economic demand, while the Federal Reserve's cautious stance on rate cuts could support the US Dollar and weigh on USD-denominated oil prices. However, expectations of increased oil consumption by 1.4 million bpd in the coming weeks, fueled by travel demand in India and Lunar New Year festivities in China, could provide upward support. Traders are also watching China’s Q4 GDP, Retail Sales, and Industrial Production data for further cues, as signs of recovery in the world’s second-largest oil consumer could boost WTI prices.
From a technical perspective, WTI crude oil has surged over 7% in a week, breaking above the $… resistance level, now turned support, and steepening its upward trendline. The strong bullish sentiment is evident as the RSI indicator surpasses 70, signalling overbought conditions and a potential correction, while price action flirts with the upper Bollinger Bands. A continuation of the bullish outlook requires a break above the $… resistance level, with the $… barrier as the next target, marking a six-month high. Conversely, a bearish scenario would be signalled by a break below $… and the upward trendline, potentially leading to $… and further to $…, which served as the base for the current bullish wave.
