Caution seemed to be the catchword in oil markets overnight. Traders were unwilling to add substantial risk approaching the weekend, and both Brent and WTI spot contracts had a quiet session with both falling approximately 50 cents from the previous day. Having had such a strong run higher in the last two weeks, contradictory inventory data this week and apparent record high OPEC production seemed to have sapped the appetite for upside risk for now.
Oil most likely remains vulnerable to more sell side profit taking into the weekend as traders chose to lock in profits in a sideways market.
Brent spot trades at 51.75 this morning, just above its 200-day average at 51.425. It remains locked between its triple top at 52.70 and support in the 50.45/65 regions, its 50% Fibonacci retracement and the 100-day average.
WTI spot trades at 48.90 this morning and its likewise ranging between major support and resistance. Resistance being the double top at 50.30 with support being in the 47.75/48.20 zone, containing its 50% retracement and the 100-day average.
Position squaring ahead of today’s Non-Farm Payrolls data also seems to be pervading both currency and stock markets with gold also no exception. Sellers locking in profits saw gold drop 10 dollars to 1256.00 at one stage, before recovering strongly to finish slightly higher than its open at 1268.75.
We expect gold to trade entirely of the nuances of the U.S. dollar into the data moving inversely to dollar strength of weakness in what may be a somewhat directionless Asia session today.
Gold trades almost unchanged at 1267.75 in early Asia. Resistance is initially at 1274.20 ahead of a double top around 1282.00. Support should appear in the first instance at 1262.50 before yesterday’s low of 1256.00, ahead of the much more significant 100-day moving average at 1252.65.