Gold, Oil and EURUSD Weekly Analysis - Week 1

Gold posts an impressive rally


The precious metal managed to breakout from the short-term consolidation to reclaim the 1500 level last week. The gains came purely out of year end balancing rather than a flight to safety.

Gold managed to break past the 1500 level to test intraday highs of 1515 before settling flat by Friday’s close. The resulting doji pattern could indicate a pullback after the strong gains. However, the declines will be limited to the support area of 1497 – 1500 level.

A breakout below this support level is needed to confirm further declines. The next target to the downside is seen at the 1480 level which acted as resistance to the ascending triangle pattern.

Oil prices rally on larger drawdown in inventory

WTI 3012

Crude oil prices also managed to post strong gains over the week. This was led by the fundamentals which showed a larger than forecast drawdown in inventory. The rally was set off initially by the API report followed later on Friday by the EIA report.

The EIA report shows that for the week ending December 20, U.S. inventory of commercial stockpiles fell 5.5 million barrels. Despite the drawdown, overall inventory levels are said to be above two percent higher than average.

The WTI prices have settled in the resistance area of 60.64 and 63.00 levels. As long as prices consolidate within these levels there will be no direction to the trend. A pullback, if convincing could see WTI retracing back to the 58.00 level where support could be forming.

Euro posts gains but overall trend remains flat


The euro currency was also seen riding higher on the back of a weaker USD. Economic data was sparse over the week but the year end balancing saw the USD weakening as investors booked profits.

This led to the euro posting sharp gains as a result. The currency pair rebounded off the support area of 1.1129 – 1.1111. It is currently trading within the upper resistance level of 1.1224 – 1.1200 region. A breakout above this level is needed to confirm further upside.

But we expect to see prices trading flat within these levels. Following a consolidation, there is scope for the currency pair to breakout higher. To the downside, the declines look to be overdone for the moment.

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