Crude Oil (April)
Last week’s close: Settled at 56.07, down 0.59
Fundamentals: Crude Oil is ripping back from Friday’s weakness with news today that Saudi Arabia plans to keep exports below 7 mbpd while keeping production “well below” 10 mbpd. In February, Saudi Arabia produced 10.136 mbpd, down from 10.24 in January and below the 10.311 ceiling they agreed to in December’s OPEC and non-OPEC pact. On the heels of poor trade data from China on Friday and on fears that Europe could further erode Crude began selling off through Friday morning to the lowest level in nearly a month. However, things found a bottom and began to consolidate higher before Baker Hughes data showed another nine Oil rigs fell off. This was the third straight weekly drop, totaling 23 over that time. Also, the rig count topped at 888 in November and growth stalled through December. Although estimated U.S production sits at a record, there is clearly a fear that it could begin slipping during this seasonally bullish time of year. Now couple this with the Saudi news and the tables have turned sharply from Friday morning.
Technicals: Price action slipped steadily through Friday morning, in fact, we made a point to go Bearish in Bias. However, we noted here as well as in the Midday Market Minute that we must see a close below major three-star support at 55.44-55.75 in order to hold this Bias. Friday’s settlement was 56.07 and although this completely negated the immediate-term weak leg, there is some technical damage. So, what now? Resistance comes in at 56.43-56.60 and this is an area that was sticky previously. Price action is pushing above here today and a close above here will leave the bulls with a clear upper hand because this pins Crude back above the trend line from the December low in which it decisively broke down below for the first time on Friday. Now, major three-star resistance still stands at 57.05-57.35; this is a level, like 55.44-55.75 support, price action has violated but failed to close out above in order to confirm a breakout. Given that Friday’s settlement failed to confirm our Bearish Bias and the sharpness of this reversal coupled with the Saudi news and seasonally bullish time of year, we now must flip back to Neutral/Bullish as we examine today’s action and close.
Bias: Bullish/Neutral
Resistance: 56.43-56.60**, 57.05-57.35***, 57.69-57.88*, 58.16-58.35**, 59.63***
Support: 55.44-55.75***, 54.71-54.76***, 53.51-53.98***
Gold (April)
Last week’s close: Settled at 1299.3, up 13.2
Fundamentals: Gold had started Friday off on a strong note given the overnight data from China and Germany on the heels of the ECB going full dove. Friday’s Nonfarm Payroll report was certainly out of character with such poor job growth and this alone pressured the Dollar from overbought territory after the ECB and ultimately buoyed Gold. Still, wage growth came in strong at +0.4% MoM and +3.4% annualized. While firmer inflation supports Gold, this is a component that could arguably get the Fed’s attention. For now, Fed Chair Powell has been making the rounds exuding patience. He speaks again tonight at 6:00 pm CT. Retail Sales was a mixed bag today with January bouncing back but December being revised lower. For now, Gold is digesting the events of the last 48 hours of trading in a healthy manner.
Technicals: Despite Golds strong session on Friday, it struggled to hold out above resistance at 1298.1-1299.2 and faces extremely strong overhead resistance at 1304.7-1307.2. As long as this healthy consolidation can remain constructive, we have no reason to think Gold won’t make another rally attempt into midweek. Price action must hold first key support at 1291-1293.5 in order to remain constructive.
Bias: Bullish/Neutral
Resistance: 1298.1-1299.2**, 1304.7-1307.2***, 1315.3**, 1323.4-1326***
Support: 1291-1293.5**, 1273.2-1280***
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