USOIL Suppressed for Second Straight Week but Defends Key Tech
The commodity continues the pullback from its 2023 highs on China and Fed woes, but holds crucial technical levels
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The commodity continues the pullback from its 2023 highs on China and Fed woes, but holds crucial technical levels
Gold has a robust inverse relationship to the 10-year real yield. The current correlation coefficient on the daily timeframe is -90%. Yesterday, the real yield declined by 6.57%, which saw the yellow metal respond and appreciate on the day.
The commodity heads towards its first losing week in around two months, weighed by fears over the Fed’s policy outlook and China’s economy
Some weakness is evident in the weekly gold chart. A lower peak has charted. If a lower trough follows, the yellow metal will be in a defined downtrend on a weekly basis. The RSI has dipped below 50, which does suggest that there is an underlying bearish momentum. The longer it maintains under 50, the more pressure will be applied to the gold price.
China’s consumer inflation fell to negative territory as today’s data showed, but Copper rises on hopes for further stimulus by authorities
Gold's daily chart has pulled back to a confluence of support.
Chinese factory activity contracted for fourth straight month, suppressing USOIL today, but heads towards it best month in over a year as authorities have pledged stimulus measure
China’s Politburo pledged to boost the economic recovery on Monday, following months of disappointing data, helping USOil enter its fifth straight profitable week
After a pause in June, it is expected that the Federal Reserve hikes by 25bps on Wednesday, 26 July. This is because although inflation is moderating, it is well above target, and the job market is still tight. The CME FedWatch tool has the probability of the rate increase at close to 100%.
Commodities are starting to look interesting again. This after a subdued period for the sector. We note that between 21 June 2022 and 3 July 2023, the Thomson Reuters/Jeffries CRB index moved in a southeasterly direction. During this period, the index’s RSI remained largely under 50, which is the bearish side of the indicator.
The breakout from the falling wedge pattern coincides with a moderation in inflation in the US. Previous Federal Reserve rate hikes are still working themselves through the transmission mechanism. A possible scenario is that July is the last rate hike of the Federal Reserve’s current tightening cycle. If so, this may provide a tailwind, and the precious metal could end 2023 on a strong note, heading towards the measured move’s…
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