Commodities were mixed on account of a weaker global economic outlook and the recently published FOMC meeting minutes where Fed officials voiced concerns of a stronger Greenback in the backdrop of a weaker economic outlook.
Crude Oil futures extended its losing streak on Thursday as rising supplies in Crude Oil inventories in the US slowed demand. The EIA, in its weekly crude oil inventories report showed an increase in inventories by 5 million, against an expected increase of 2.1 million after the previous week saw Crude oil inventories decline by -1.4million.
Global sentiment was already downbeat with signs of slowdown from China. A stronger US Dollar has also helped to further weaken Crude oil prices. WTI crude oil closed Thursday by more than -3% declines. In the previously published analysis on Crude Oil, we anticipate WTI Crude prices to decline towards a long term target of $62.5 a barrel.
Gold futures were up after the FOMC meeting minutes highlighted a dovish tone in the Fed officials, which was overshadowed by the hawkish projections during the FOMC press meet. As the Greenback eased after more than an 11-week rally, Gold futures started paring its previous losses, moving back above the $1200 psychological level after making a low towards $1182, a long term support region. The precious metal is likely to react to the many speeches from key Central bank officials from the Fed and the ECB.
In the Gold analysis published earlier this week, we mentioned that Gold could likely rally back towards $1227, which it did yesterday. It is also of interest to note that yesterday's daily candle closed with a sharp upper wick near this key support/resistance level. Today's price action in Gold will be the key for setting the tone for next week. A bearish close could see Gold futures decline yet again and will test the familiar 1180 region, which could possibly break this time around paving way for further declines.
The dovish tone of the FOMC meeting minutes has put to question, speculation of a 2015 interest rate hike as was previously anticipated. The key headwinds to the Greenback come from Eurozone, as further deflationary pressures could weaken the economic outlook for the region which could potentially affect exports from the US.
The current price action in Gold looks to be strongly correlated to the US Dollar's strength. The weakness that we have noticed in the Dollar index, at this point is an expected correction with a potential to the upside once the correction has been completed, as pointed out in the weekly Dollar Index analysis here.
The key event next week for Gold futures is likely to come from the retail sales data and a scheduled speech by Janet Yellen at a conference next Friday. With the markets reacting mixed to the FOMC's meeting minutes, investors will be definitely clued in for comments from Fed Chair Yellen for future course of action.
Author: John Benjamin
John is a market analyst for Orbex Ltd. and is a forex and equities trader having been involved in trading since late 2009.
John makes use of a mix of technical and fundamental analysis and inter-market relationships.
For any comments or questions, John can be reached at email@example.com