Crude Oil, Gold Analysis: RBNZ hike, UK CPI data and Fed minutes loom

Asian Indices:

• Australia's ASX 200 index fell by -42.9 points (-0.59%) and currently trades at 7,217.00
• Japan's Nikkei 225 index has fallen by -202.41 points (-0.66%) and currently trades at 30,755.36
• Hong Kong's Hang Seng index has fallen by -190.16 points (-0.98%) and currently trades at 19,241.09
• China's A50 Index has fallen by -72.52 points (-0.56%) and currently trades at 12,837.64

UK and Europe:

• UK's FTSE 100 futures are currently down -31 points (-0.4%), the cash market is currently estimated to open at 7,731.95
• Euro STOXX 50 futures are currently down -17 points (-0.39%), the cash market is currently estimated to open at 4,325.38
• Germany's DAX futures are currently down -64 points (-0.4%), the cash market is currently estimated to open at 16,088.86

US Futures:

• DJI futures are currently up 44 points (0.13%)
• S&P 500 futures are currently up 6.5 points (0.16%)
• Nasdaq 100 futures are currently up 20.75 points (0.15%)

• NZD was the weakest FX major overnight as the RBNZ delivered a dovish (and potentially final) 25bp hike and kept their peak OCR forecast at the current rate of 5.5%
• There was initially some unwanted confusion with Reuters printing a hold at 5.25% before revising the figure to 5.5%, but this did little to lift NZD pairs from their lows
• Oil prices rose for a third day after Saudi Arabia’s Prince Salman warned bearish speculators to “watch out”, in what has been taken as a forewarning of more OPEC+ supply cuts
• Oil prices were also higher yesterday due to a drop in US crude inventories, with crude oil futures prices probing key resistance around $74 overnight
• Debt ceiling negotiations are yet to move any closer to a deal, with it now looking increasingly likely may have to vote next week ahead of the June 1^st deadline to avoid a US default
• US Treasury Secretary Janet Yellen is set to speak on a topic called “The US Economy” at the Wall Street Journal’s CEO Council Summit, which presents an excellent opportunity to reiterate the fear of catastrophe if the debt ceiling is not raised by June 1^st
• The FOMC minutes are released at 19:00 BST, but with the Fed having paused and members out in full force presenting various views over another pause or hike in June, I’m not expecting anything substantial to be gleaned from May’s minutes
• But first, the main economic event for the European session is UK inflation at 10:30 BST, which could be the proxy for another BOE hike if it does not cool as quickly as hoped

Crude oil 30-minute chart

Oil futures gapped higher at the open overnight following the stern waring from the Saudi Arabia Prince, which now sees prices consolidating below key resistance at $74. A strong trend is now developing on the 30-minute chart and momentum is increasing into these highs, although the overnight consolidation now presents a potential bull flag. If successful, the flag projects an approximate target around $75, just above the daily R2 pivot and it would require direct gains from the pattern for it to be valid.

However, if $74 provides resistance initially and prices pull back, bullish could seek evidence of a swing low above the $73 support cluster or bullish trendline, use $74 as an initial target with a onus being if prices go on to break above it.

Gold daily chart:

We previously wared that the odds of gold simply breaking to new highs again (after its failed break earlier this month) were low, given the significance of the 2075 area and tendency for choppy price action this time of year. We may have seen a deeper pullback were it not for the US debt-ceiling debacle, which has seen it remain above $2000 initially and more recently $2000. But with equity markets lower yesterday and the slow realisation that debt ceiling negotiations really could be dragged on and become close to the wire, we suspect 1950 could be the interim low unless a deal is struck quickly.

Furthermore, a 2-bar bullish reversal and bullish pinbar show demand around the 1950 area, and the RSI (2) reached oversold recently ahead of the double bottom. A rally towards (if not to $2000) seems achievable over the near-term, with a risk of a break above it if negotiations truly drag on. If 1950 breaks to the downside then trend support becomes the next defence level for bulls, a break of which assumes a deal to raise the debt ceiling has been reached.

Economic events up next (Times in GMT+1)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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