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A weaker US Dollar and more vaccine approvals appear to have inspired oil prices to move higher in Asia, boosted by robust regional manufacturing PMI data. Brent crude has risen 1.15% to USD52.05 a barrel, and WTI has rallied 1.70% to USD49.00 a barrel.
OPEC+ meets today to decide on the next stage of production cuts, the first of its monthly cycles of meetings to manage production targets more dynamically. Markets would appear to be pricing that oil production targets will be held unchanged this month. However, if discord emerges, and the meeting drags on over more than one day, oil prices could correct lower from here until the situation becomes more evident.
That said, the technical picture for both contracts is bullish. Brent crude is now just below resistance at USD52.50 a barrel, with a daily close above targeting gains to USD54.00 a barrel. Support lies at USD50.50 and then USD49.50 a barrel. WTI looks set to test resistance at USD49.30 a barrel, which will target USD54.50 a barrel. Support is at USD47.50 followed by USD46.00 a barrel.
There is plenty of event risk in the week ahead even without OPEC+. Pullbacks from these levels could be rapid and quite deep, although it would take a huge move, probably caused by OPEC+, to upset the underlying bullish uptrend.
Today, gold appears to have caught a Bitcoin tailwind after bitcoin moved some 15% higher to USD34,000 over the New Year Holiday. That has seen gold leap 1.20% to USD1921.50 an ounce today. Putting gold and Bitcoin in the same asset class seems intellectually dubious at best, but I have never been one to argue with momentum and FOMO.
There was likely more than a few stop-losses activated one gold cleared USD1900.00 an ounce, and with liquidity still lower than usual, that has accelerated the rally. The move higher leaves gold well clear of USD1900.00 an ounce, which now becomes support and an intra-day pivot. That is followed closely by the 100-day moving average at USD1895.00 an ounce. Gold’s next target becomes the November high at USD1965.00 an ounce, although I expect some sellers to emerge before that at USD1930.00 an ounce.
With gold hitching its wagon to the Bitcoin-mania for now, investors should monitor any sudden dips in the cryptocurrency, as that may see gold follow suit.
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