Crude Oil Prices Struggle on Covid Upswell, US Fiscal Deadlock


CRUDE OIL & GOLD TALKING POINTS:

  • Crude oil prices may be supported in risk-on trade, range resistance holding
  • Gold prices testing familiar support, Dollar and yields offer conflicting cues
  • Covid-19 upswell, US fiscal stimulus impasse remain the top themes in focus

Crude oil prices fell alongside stocks as risk appetite soured across global financial markets. The MSCI World Stock Index – a proxy for the performance of global equities and a pace-setter for market-wide sentiment – snapped an eight-day winning streak. Gold prices edged higher as the downbeat mood weighed on bond yields, boosting the appeal of non-interest-bearing alternatives.

Investors turned defensive as Covid-19 cases surged across the world even as US stimulus negotiations stalled. Another wave of the virus has brought on renewed lockdowns that threaten to delay economic recovery. Meanwhile, the White House has ceded its role in fiscal aid talks to the Senate, where the Republican majority is pushing for a far skinner $500 billion effort than the House Democrats’ $2.2 billion proposal.

Optimism in the wake of news earlier this week that Pfizer has developed a Covid-19 vaccine with an efficacy rate of close to 90 percent seems to have faded. This makes sense: the treatment is likely to be devilishly difficult to deliver at scale in any kind of near-term way, if only because it must be stored at -70 degrees Celsius. The pinpoint precision needed for the two-injection process complicates things further.

CRUDE OIL MAY FIND SUPPORT IN RISK-ON SENTIMENT AS GOLD STRUGGLES

Looking ahead, a relatively quiet economic calendar in the final hours of the trading week may keep sentiment trends at the forefront. Bellwether S&P 500 futures pointing convincingly higher, flagging a risk-on tilt. That may help underpin crude oil prices for now. Gold might struggle for direction as yields are pulled upward even as the anti-risk US Dollar falls, offering conflicting cues to the perennially anti-fiat metal.

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CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices have stalled at range resistance in the 42.40-43.88 zone yet again, with a Shooting Star candlestick pointing to indecision and warning that a pullback may be ahead. Support is in the 34.64-36.15 area, with a daily close below that exposing the 27.40-30.73 region. Alternatively, a push above resistance seems likely to target the $50/bbl figure next.

Crude Oil Prices Struggle on Covid Upswell, US Fiscal Deadlock

Crude oil price chart created using TradingView

GOLD TECHNICAL ANALYSIS

Gold prices are once again idling at support in the 1848.66-63.27 area. A break below that confirmed on a daily closing basis looks like it may set the stage for a slide below the $1800/oz figure. Resistance begins in the 1911.44-28.82 inflection zone and is following by the swing top at 1965.55.

Crude Oil Prices Struggle on Covid Upswell, US Fiscal Deadlock

Gold price chart created using TradingView

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— Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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