Gold falters around $2k, crude oil looks set for a pre-OPEC bounce: Asian Open

Market Summary:

RBA governor Michele Bullock warned that domestic demand is increasingly becoming the main driver for price pressures and that trimmed mean (the RBA’s preferred measure) remains too high. And the correct response to that is tightening policy. For me the message is simple; if Aussies keep spending and soaking up the higher prices that companies are more than happy to pass on, expect higher interest rates.

The final consumer sentiment report from University of Michigan showed 1-year CPI expectations ticked higher to 4.5% from 4.4%. Whilst this is not ideal for those calling for Fed cuts in 2024, consumers are easily swayed by headlines and politic in a given month and we could easily see these expectations reverse in a couple of weeks when the flash report is released.

Once again, Wall Street rallied the day ahead of Thanksgiving which saw the Nasdaq 100 reach and exceed yesterday’s 16,000 and 16,100 targets before pulling back to form a small bearish hammer on the daily chart. With the US on holiday Thursday and a half day for markets on Friday, volatility and trading volumes may well be lower than usual. With that said, such conditions are ideal for wild swings if the correct catalyst arrives.

Events in focus (AEDT):

• Japan - Workers Day
• United States - Thanksgiving Day
• 09:00 – Austrian flash manufacturing and services PMI
• 16:00 – Singapore CPI, industrial production
• 19:30 – German flash manufacturing and services PMI
• 20:00 – Euro flash manufacturing and services PMI
• 23:30 – ECB Publishes Account of Monetary Policy Meeting

ASX 200 at a glance:

• The ASX 200 unfortunately performed as expected on Wednesday; low volatility and ultimately directionless
• Due to Thanks giving in the US, the odds of another low volatility day seem high for the ASX unless markets are treated to a fresh catalyst

Crude oil technical analysis (daily chart):

Prices fell an impressive -25% since the September high, although the technical bear-market fall didn’t quite reach the lower $70 target. A false break of $75 has also since seen a potential higher low in form of a bullish hammer on the daily chart, so I suspect crude oil will now try and reach for $80 at a minimum – a break above which opens up a deeper bounce to $82 / the Jan and April highs.

Gold technical analysis (daily chart):

Softer yields and the dollar have been a clear benefit for gold prices, all thanks to softer US economic data that has brought forward the case for the Fed’s first cut in 2024. The move lower in the US dollar looks overextended, and the seasonal pattern for the US dollar index is to weaken into Thanksgiving and strengthen in the days following it. And with an effective 4-day weekend looming in the US, gold currently lacks the legs to commit fully above $2000.

A small bearish inside day formed just beneath the key level of $2000 to bring a double top into the mix. I wouldn’t want to be long at these levels, and a break beneath $1985 brings a countertrend move into the mix. Quite how deep a pullback may become is down to how far the US dollar can bounce – or if it does at all. But a move to $1960 seems feasible, at which point bulls could seek evidence of a swing low to seek bullish setups in anticipation of a break above $2000.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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