Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 15/05/20

Gold prices rise as tensions between US and China escalate


Gold is finally breaking out from its range as a war of words between President Trump and China saw investors shifting out of risk assets. This modest risk off sentiment has pushed gold prices higher as a result. The precious metal has been trading flat for the past week and more amid lack of any new fundamentals.

For the moment, price action is approaching the previously set highs of 1729.89. A breakout above this rectangle consolidation could see some near term gains emerging. For the moment, the minimum upside is seen at 1775 at the very least. But we cannot rule out further gains if the momentum continues.

The main risk is the downside exposure. If gold prices fail to breakout above 1729.89, then we expect a drop in the near term. The lower support level at 1683.90 will be the most likely target initially. But expect to see further declines if price action breaks past this support level.

WTI crude oil attempts to rise slightly

WTI 1505

Crude oil prices are posting some modest gains, rising slightly higher. However, oil prices remain well off the previous levels set near 28.00. The slight gains comes as the US crude oil inventory levels saw a drawdown. This was bullish for oil prices which fell sharply just a few weeks ago due to lack of storage.

We continue to watch how price action will unfold at the current level. If prices breakout above the 28.00 level then we could see some stronger gains coming through. The upside opens up to the 42.00 handle. But this can only be valid if oil prices establish support at 28.00 after initially breaking past this level.

Alternately, to the downside, failure to post gains above 28.00 could see oil prices pushing back. The lower support at 20.00 will be the downside support level which could see renewed buying activity. This could keep prices well support while also giving some upside bias to oil prices via the inverse head and shoulders pattern that could form.

Euro tests the support level once again


The euro currency fell briefly below the main support level of 1.0784 before pulling back intraday. The declines come as the US dollar is trading slightly higher. The dollar jumped on the back of potentially more monetary stimulus from the Federal Reserve Bank. Fed Chair Powell gave a speech late Wednesday evening.

As a result, the dollar strength is keeping up the pressure on the euro currency. The current consolidation is showing signs of a possible bearish flat pattern. Of course the support level at 1.0784 will be critical to this pattern.

If prices fail below this level, we expect to see declines down to 1.0500 level of support. This will validate the bearish flat pattern giving it the minimum measured downside target. However, expect to see a lot more consolidation taking place at the current levels which could keep prices a bit volatile.

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