Talking Points:
- Gold prices working on fifth consecutive decline on Fed rate hike bets
- Crude oil prices continue to show signs of topping below $49/bbl mark
- Upbeat surprise on US New Home Sales data may punish commodities
Firming bets on a near-term Federal Reserve interest rate hike continue to undercut demand for anti-fiat and non-interest-bearing assets, weighing on gold prices. The yellow metal dropped to a one-month low while priced-in year-end outlook for the US central bank’s benchmark lending rate implied in Fed Funds futures rose to the highest since late March.
More of the same may be on tap if the upcoming release of April’s New Home Sales figures tops expectations. US economic news-flow has cautiously improved relative to consensus forecasts in the past two weeks, opening the door for an upside surprise. Crude oil prices may likewise trade lower in this scenario as the prospect of on-coming monetary tightening weighs on risk appetite, pressuring sentiment-sensitive assets including the WTI contract.
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GOLD TECHNICAL ANALYSIS – Gold prices are working on their fifth consecutive down day, which if confirmed, would make for the longest losing streak in six months. Near-term channel floor support is at 1237.72, with a break below that on a daily closing basis targeting the 38.2% Fibonacci retracement at 1205.30. Alternatively, a move back above resistance marked by the 23.6% Fib expansion at 1261.70exposes the 1294.26-1307.49 area (January 22 2015 high, 38.2% expansion).
CRUDE OIL TECHNICAL ANALYSIS – Crude oil prices remain locked in a narrow range a Shooting Star candlestick reinforced by negative RSI divergence continue to warn of topping in the works. A daily close below range support at 47.41, the 38.2% Fibonacci expansion, opens the door for a test of the 23.6% level at 45.73. Alternatively, a break above range resistance at 48.77 marked by the 50% Fib exposes the 61.8% expansion at 50.13.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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