Commodities in focus this week
Xauusd (Gold) has taken support after a crazy start of the week. Trading in the early Asian session on Monday and breaking the major support level of $1,750 seems like a crash to start the week. Gold spent the consequent hours to recover from the bottom, but by the end of the day, it still was 2% lower.
While the trading environment may have worsened the heavy selling, there's no doubt that it was more so due to the strong economic data and the U.S. Fed speak that happened late last week. Gold still recovered after the deep crash and then got resistance at that last support level and came down once more, confirming the breakout.
Now It has been stabilised in at $1,725 - $1,745 range and is pretty much sideways in the day. The short-term outlook does not seem to look in favour of the precious metal, especially in light of the strong data coming from the U.S.
If such a wait and watch approach is indicated and adopted at Jackson Hole meet, then the yellow metal prices may not go into a deep drop, but rather decline based on the strength of the Job and economic data. The Fed could begin tapering between October to December the $120 billion it has been putting monthly into bonds and mortgage-backed securities to support the COVID affected economy
Will Oil Sell-Off continue?
Crude Oil went through a rough week since peaking on the final trading day of July, just shy of last month's high. Crude's price increment towards many-year highs has been built on recovery optimism as economies re-opened amid successful vaccine programmes. However, the Delta variant has affected the works, with the U.S. and China seeing high Covid Cases, and new restrictions being imposed. As a result, we may also see slow activity if it doesn't get a tight grip on the spread.
More than 10% drop that we saw this month has seen oil trading back around July's low levels, following the last drop. Once again, Crude has seen support at $65, with Brent Oil similarly catching around $67. A break of this support can spell bad news for oil prices in the coming time.
This suggests more to fear from New Delta Variant covid virus surges than we're currently watching because it's all very stable outside of crude markets. The Fed's tapering plans based on strong economic development and strengthening job market is creating more attention. We feel there's a very different approach occurring among asset classes now. Should that support hold, then we may simply establish a wider summer trading levels.
This article was submitted by Kamal Paliwal, Business Development Manager at HonorFX.