Weekly data: Oil and Gold price action before the FED decision

Steffy Bogdanova
March 20, 2023 2:26 pm

This article was submitted by Antreas Themistokleous, market analyst at Exness.

This preview of weekly data looks at USOIL and XAUUSD where Crude oil is making extraordinary losses and Gold is in an aggressive bullish momentum following the domino effect of bank failures expanding to Europe.

The most important economic data for this week are:

  1. Canadian inflation rate on March 21st at 12:30 PM GMT. Market expectation is for a drop to 5.4% against a previous recording of 5.9%. If the consensus is confirmed we will be seeing the lowest level of inflation in Canada for the last year.
  2. British Inflation rate on March 22ns at 07:00 AM GMT. The figure is expected to slightly decrease by 0.3% which could possibly influence a more aggressive stance by BoE in the future meetings since inflation does not go down fast enough and possibly supporting the quid in the short term.
  3. FED interest rate decision on March 22nd at 06:00 PM GMT. The expectations are for a single hike in interest rates (addition of 0.25%). The FedWatch Tool although prices in the probability of NO HIKE following the recent events with big banks failures with a possibility of 50%!
  4. FED press conference on March 22nd at 06:30 PM GMT following the interest rate decision. The traders will be paying attention to the press conference because it would clarify the future developments on interest rate policy by the FED.
  5. BoE interest rate decision is set to be released on March 23rd at 12:00 PM GMT. The scenario of a single hike (0.25%) seems to be the most possible scenario following the inflation publication of the previous day in which case would support the British pound against its pairs.
  6. Japanese inflation rate on Thursday March 23rd at 11:30 PM GMT where the consensus is for a decline of around 1%. If this is confirmed it would be the first decline in inflation since January 2022 and will see how the markets will react to this expected figure.

USOIL, daily

Crude oil prices are still in free fall even after signals that central banks are stepping in to help troubled lenders in the U.S. and Europe. Speculators had been building their long position in the oil market on the back of expectations that there will be an increased demand recovery from China following the reversal of its zero-covid policy, together with the view that Russian oil supply will edge lower.

For the time being there are two scenarios that could help boost the price of oil. The first would be an OPEC response by stepping in and announcing further supply cuts in order to try bringing some stability to the market. But this cannot just happen overnight or take such a decision based on a very short reaction of the market. Probably they will wait for the dust to settle and take action on their next meeting which will take place in early July. The second scenario would be the US Department of Energy(DoE) announcing that they will be refilling their SPR (Strategic Petroleum Reserve) which is at its lowest level since the 1980’s. Previously the US Department of Energy (DoE) said that they would look to refill the SPR if WTI traded around US$67-72/bbl which is the case right now.

On the technical side the price of Crude oil on the daily chart is “walking the band” ( touching the Bollinger bands in consecutive sessions) indicating great push by the bears in high volumes. It is trading at a 15 month low with no signals of correcting to the upside just yet while the 50 day moving average crossed below the 100 SMA indicating the bearish momentum is going strong.

Gold-dollar, daily

On Sunday, UBS agreed to buy Credit Suisse for $3.23 billion in a deal backed by a massive Swiss guarantee of around SFr9 billions but only after UBS has borne the first SFr5 billion of losses on certain portfolio of assets. Even after this event gold prices kept rising reaching the highest level since mid April of last year. Investors and traders don’t seem convinced that the recent moves by authorities can put a stop to the banking system fallouts, so it could take some time for gold to reverse its current bullish trend. The fragile environment will yet to be tested after economic data coming from the US about the FED’s interest rate decision later this week where there is a high probability of no hike in the horizon.

From the technical standpoint the price is still trading exactly on the upper band of the Bollinger bands indicating high volatility in the market for gold which would be boosted even more especially around the FED’s decision and the press conference after that. The Stochastic oscillator is recording extreme overbought levels but this is somewhat irrelevant in cases of high volatility. The 50 day moving average is trading above the 100 day moving average further validating the strong bullish momentum that has built up in the market. For the time being there are no signs of a correction to the downside but this can change rapidly depending of the developments of the banking environment in the following days.

In any case the next level of resistance seems to be laying around the $2,000 mark which consists of the psychological resistance of the round number and is also an inside resistance area since early March of last year. In the event of a correction to the downside in the following sessions we might see some support around the $1,950 price area which is the last area of price reaction since late January 2023.

Disclaimer: opinions are personal to the author and do not reflect the opinions of Exness or LeapRate.

LeapRate Analyst

Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
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