Oil grinds higher
Oil prices ground higher overnight as black gold continued to benefit from recovery sentiment in the US/Europe/China axis. Brent crude rose 1.05% to USD69.45 a barrel, advancing to USD69.60 a barrel in Asia. WTI rose 1.25% to USD66.30 a barrel, adding another 15 cents to USD66.45 a barrel in Asia.
Brent crude was within shouting distance of significant resistance at USD70.00 a barrel, at time of writing. A rise through USD70.00 should trigger more systematic buying and see it advance to USD71.50 a barrel quite quickly. Support lies at USD68.25 and USD67.75 a barrel.
WTI remained comfortably within its bullish channel and had resistance just above at USD66.60 a barrel. That will set up a larger rally, potentially reaching near the channel’s top at USD68.00 a barrel. Support was at USD65.00 and then the bottom of the channel at USD64.00 a barrel.
Gold’s outperformance continues
Gold had another impressive session overnight, rising 1.30% to USD1867.00 an ounce. In Asia, it advanced slightly, rising to USD1868.00 an ounce.
The trigger for the renewed gold buying appears to be its rise through its 200-DMA at USD1848.00 yesterday. That seems to have triggered systemic and fast-money buying.
However, the pace of the gold rally appeared to be outpacing fundamentals, and the Relative Strength Index (RSI) entered overbought territory. That was a warning sign that gold was vulnerable to a short-term pullback, even if its overall fundamentals have not changed.
Gold had resistance just above at USD1875.00 an ounce, followed by USD1920.00 an ounce, although I do not doubt that more fast money will enter the fray if USD1900.00 capitulates.
Gold’s nearest support was yesterday’s breakout region at USD1845.00 an ounce, where the 200-DMA also loitered earlier today. That is followed by USD1820.00 an ounce.
Although gold looks set for higher honors, a safer strategy might be to buy on dips rather than chasing it higher at these overbought levels in the short term.