Crude Oil Price Drop May Continue if UK GDP Data Disappoints

CRUDE OIL & GOLD TALKING POINTS:

Crude oil prices make good on bearish chart setup, hit 3-week low
Gold prices rise as global slowdown worries weigh on bond yields
Risk appetite may suffer further if 4Q UK GDP figures disappoint

Crude oil prices paused to digest losses Friday following a brisk, sentiment-driven drop. Gold prices rose as yields continued to drift lower amid lingering global slowdown fears. The rate on the benchmark 10-year US Treasury bond hit a weekly low, boosting the relative appeal of non-interest-bearing assets.

UK GDP DATA MAY SOUR SENTIMENT, WEIGHING ON CRUDE OIL

Fourth-quarter UK GDP data is in the spotlight from here, with forecasts pointing to a slowdown. Output is expected to have added 0.3 percent in the final three months of 2018, down from 0.6 percent in the three months to September. The on-year trend growth rate is projected to tick down to 1.4 percent.

UK economic news-flow has notably deteriorated relative to analysts’ baseline projections recently, opening the door for a disappointing outcome. That might compound concerns about a downturn in the global business cycle, sending crude oil lower alongside other risky assets.

The implications of such an outcome for gold are bit more convoluted. Support from a further drop in bond yields may be countervailed if haven-seeking capital flows buoy the US Dollar, undermining the appeal of anti-fiat alternatives epitomized by the yellow metal.

See our guide to learn about the long-term forces driving crude oil prices!

GOLD TECHNICAL ANALYSIS

Gold prices continue to stall above a dense layer of support underpinned by a rising trend line set from mid-November. A break through this barrier – confirmed on a daily close below 1294.10 – would expose the support shelf at 1276.50 next. Alternatively, a push above chart inflection point resistance at 1323.60 sets the stage for a challenge of the pivotal 1357.50-66.06 region.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are edging lower after producing a bearish Evening Star candlestick pattern as expected, hitting a three-week low. From here, a daily close below support in the 49.41-50.15 area opens the door for a decline toward the 42.05-55 zone. Alternatively, a reversal back above the February 4 high at 55.75 sees the next layer of resistance in the 57.96-59.05 region.