Weekly data: Oil and Gold price action following the failure of three US banks

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 approaching the end of a triangle formation on the daily chart and Gold is in an aggressive bullish momentum following the failure of three US banks.

The most important economic data for this week are:

  1. Claimant count change today at 07:00 AM GMT. Market consensus is for a further decline reaching -27 thousand claims compared to the latest release of -12.9 thousand. This could support the quid since less people are claiming unemployment allowances therefore the labor market looks healthy for the time being.
  2. UK unemployment rate today at 07:00 AM GMT. The figure is expected to slightly increase by 0.1% but since this data is for the month of January it might have already been priced in so no major effects might be seen on the British pound.
  3. US inflation rate today at 12:30 PM GMT. The expectations are for a further decline on the inflation figure of around 0.4% reaching 6% for the month of February. This is critical news for the Dollar since it would certainly influence the stance of the FED given the crisis with Silvergate and SVB failures.
  4. US PPI on Wednesday at 12:30 PM GMT. The consensus is for a decline of around 0.4%. Lower producer prices likely mean consumers will pay less at the retail level and possibly generate some short term gains for the Dollar.
  5. ECB interest rate decision set to be released on Thursday 16 March at 12:15 PM GMT. The scenario of a double hike (0.50%) seems to be the most possible in which case would support the Euro against its pairs. In the event of a single hike however then we might witness some minor losses on the currency at least in the short run.
  6. OPEC monthly report is set to be published on Tuesday where investors and traders would want to get some hints on the action plan of the organization in terms of production levels in the near future in an effort to determine the price of the black gold.

USOIL, daily

Crude oil prices took a hit on Monday the 13th as fears of a new financial crisis hit following  the recent data of the Silicon Valley Bank(SVB) collapse. This is not the only bank that failed since Silvergate announced plans to wind down operations and voluntarily liquidate as well as state regulators closed New York-based Signature Bank(SBNY.O) on Sunday. U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system.

The price of crude oil was only supported slightly from recovery in Chinese demand for the commodity while important economic data coming from the USA this week will have an effect on the price in the following sessions since inflation rate and PPI are expected to increase volatility in the market.

On the technical side the end of the bearish symmetrical triangle is in sight without any clear signal yet as to where the price will head. The Stochastic oscillator is not showing any overbought or oversold levels while the cross of the 50 day moving average above the 100 day moving average gives some indications of bullish momentum.

In any case the levels of $78 and $74 are strong resistance and support levels respectively with the resistance consisting of the 50 and 100 moving average lines and the latter consisting of the lower band of the Bollinger bands as well as the lower boundary of the triangle formation.

Gold-dollar, daily

Gold has been traditionally considered a safe haven asset in times of uncertainty and this is what is currently happening on the market following the failure of three banks last week. After recent events of banks stopping their operations the price of gold made gains as its an attractive addition to investor’s portfolios because of its relative “stability” to balance out the uncertainty that is currently holding strong throughout the markets. The Federal Reserve might also slow down their pace of rate hikes and this can also be seen on the fedwatch tool with the probability of no hike being more than 35%. This was not a scenario until Friday March 10th but is now gaining more ground coming up to the next FED meeting on March 22nd.

From the technical point of view the price is trading above the upper band of the Bollinger bands indicating great volatility in the market for gold while the 50 day moving average is trading above the 100 day moving average further supporting the bullish momentum which is in effect. The Stochastic oscillator is in the extreme overbought levels but this can add little worry to the extreme bullish movement of the yellow metal.

With the majority of the technical indicators showing a bullish image the most probable scenario in the short term is for the price to continue traveling North on the chart with a first point of possible resistance around the $1,960 price area which is an inside resistance level since early February. In the event of a correction to the downside the first point of possible support might be found around $ 1,880 where is the crossing of the 50 day moving average, the upper band of the Bollinger bands and the 23.6% of the daily Fibonacci retracement level.

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

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