The Veterans Day holiday in the US saw oil trading volumes decline overnight. After both Brent and WTI spiked higher initially, they quickly gave up those gains, finishing almost unchanged at USD43.75 and USD41.40 a barrel respectively. Both contracts have drifted 15 cents higher in a directionless Asian session as the US dollar weakens slightly today.
Oil appears to be consolidating its recent impressive gains at these levels. Although OPEC+ continue making noises about tweaking the production cut agreements to support prices, if oil continues to trade sideways for the next session or two, momentum will fade. That will leave oil vulnerable to a possibly substantial downside correction, with many new long positions likely initiated near the top of the recent range.
Brent crude has longer-term resistance in the USD46.50 a barrel region with a downside correction possibly extending to USD42.00 a barrel. WTI has formidable resistance ahead of USD44.00 a barrel, with a correction lower potentially reaching the USD40.00 a barrel area. Official US Crude Inventories are expected to shrink by 900,000 barrels this evening, and a surprise increase could be enough to initiate a correction.
Gold bumps along the bottom
After the near USD100 an ounce collapse on Monday, gold has failed to recoup any of that fall. Gold continued to consolidate its losses, range-trading just above Monday’s low of USD1850.00 an ounce, which forms initial support.
Rallies have been limited to brief forays above USD1880.00 an ounce, with gold finishing the overnight session -0.60% lower at USD1865.00 an ounce. It has crept higher to USD1870.00 an ounce in Asia as the dollar edges lower, in dull range trading.
Gold finds itself in no man’s land now, hemmed in by support and resistance at USD1850.00 and USD1880.00 an ounce. The problem with being in no man’s land is that you are in danger of being shot at by both sides. The balance of risks suggests that the trauma of Monday has not yet passed. An extension of losses to USD1800.00 an ounce is still the most likely outcome.