Our views

Gold has been closely echoing dollar based inputs including recent positive U.S. economic data. Yesterday’s ISM services PMI was significant considering the economy is primarily services driven, gave a boost to the greenback after beating expectations. This compounded the tight labor market reinforced by last week’s Non-Farm Payrolls (NFP). Recent Fed talk around moderating interest rate hikes has now placed this outlook under scrutiny with possibly more hawkishness to come. The resultant effect has been the Fed’s terminal rate rising back above the 5% level once more and without any Fed officials scheduled to speak leading up to December 14 meeting, price action for XAU/USD will be primarily driven by economic data and technical levels.   

Price action on the daily spot gold chart shows the formation and continued development within the rising wedge formation . A break below wedge support could open up the 1750.00 psychological handle. The Relative Strength Index (RSI) is exhibiting slowing bullish momentum suggesting possible bearish divergence which supports a more bearish outlook.

Failure by bulls at the 200-day SMA again provides backing for the short-term downside bias.

We opened the short position at 1.3474 and closed at 1.3395 when the second candlestick closed bullish for confirmation, from support. 

Brent crude oil is trading marginally higher on Friday and could close in the green for a fourth consecutive day, last seen in early October.

OPEC+ is set to meet on Sunday December 4th to discuss a possible shift in its supply quota. Up until now, there has been rumors of production increases, cuts and no change thereby increasing the hype and anticipation around the OPEC+ meet. It is fairly likely that there will not be a production increase considering depressed oil prices as well as global recessionary fears. In addition OPEC+ may not want to surprise markets by cutting before year end and may look to acquire more data before the next meeting to make an informed decision. A decision of no change is probable after taking into account the above factors which should not shift the price needle too far.
An action that may provide substantial stimuli for crude markets is the decision around a Russian oil price cap. The pronouncement is set for December 5th but there has been no unanimous agreement amongst the member states as of yet. According to the most recent information, the price cap is rumored to be set at the $60/bbl mark down from $65-70/bbl. The lower the price cap level, the more chance that Russia retaliates by constraining or eliminating supply altogether and could spark a push higher in crude prices.

Price action suggests Brent crude could be heading for a leg lower after yesterday’s long upper wick candlestick. This could be invalidated should today’s candle close above the September swing low at 87.28 and the coinciding downward sloping trendline (black). The Relative Strength Index (RSI) is indicative of bearish momentum (below 50) which supports a subsequent downside move short-term. That being said, fundamental influences are the key driver going into next week and price action will be highly dependent on these forces.

We opened the long position when the candlestick hit the resistance.  

We closed the long position when the second candlestick closed bearishly below resistance. 

Trade accordingly with your risk

The pro-growth Australian dollar has rallied on the back of a risk-on global market environment. Fed Chair Jerome Powell kicked things off last night with a neutral/dovish statement which did not show signs of pushback to the recent ‘Fed pivot’ narrative. Some highlights of the speech included avoidance of overtightening, a 50bps interest rate hike in December and achieving a soft landing. This goes against their what seemed to be their primary objective of combating inflation for some time.

Australian manufacturing PMI on the other hand failed to match estimates but the external backdrop mentioned above has overshadowed this data as markets look ahead to the key core PCE deflator
Should actual data print in line with estimates (5%) there could be further Aussie strength but anything higher could push against Mr. Powell’s speech leaving room for the greenback to find some bids.  

We opened the short position at 0.9932 and closed at 0.9440 when the second candlestick closed bullish above the support. 

We opened the long position when the candlestick closed bullishly at the resistance.   

We closed the positions when the second bearish candlestick closed under resistence.   

We opened the long position at 3.70 and closed at 3.84 when the candlestick closed bearish, rejecting the resistance.  

We opened the long position when the candle closed bullishly above the resistance. 

We closed the long position when the candle closed below the EMA200 trend indicator and below the resistance. 

Trade accordingly with your risk

I opened the long position at 1.5260 and closed at 1.5475 when the candlestick closed bearishly under resistance. The long position was opened when the candlestick closed above the previous resistance.