Gold Rebounds, Crude Oil Tests Support as Markets Eye Fed, Trade Talks

View related analysis:

Wall Street Futures Pull Back Ahead of Fed Meeting

Wall Street futures closed lower on Monday during thin holiday trade, as investors booked profits ahead of this week’s Federal Reserve (Fed) meeting and adopted a cautious tone amid ongoing trade negotiations. The Nasdaq 100 (-0.69%), S&P 500 (-0.65%), and Dow Jones (-0.26%) all formed small bearish inside days, highlighting a reluctance to commit in either direction ahead of the FOMC meeting.

ISM Data Highlights Sticky Inflation Ahead of FOMC

ISM services expanded slightly faster in April, rising to 51.6 from 50.8. The internals were generally solid, with the main concern being the ‘prices paid’ component, which jumped to a 28-month high—signalling persistent inflationary pressure. Employment also contracted for a second consecutive month, though at a slower pace (-49 vs -46.2 previously). This followed last week’s ISM manufacturing report, which showed the sector contracting at its fastest pace in six months, with prices paid rising at their fastest rate in nearly three years and employment also stalling for a second month.

These inflationary pressures make it difficult for the Fed to adopt a dovish tone this week. Fed funds futures currently favour a rate cut in July, but it’s unlikely the Fed will tip its hand two months in advance—especially with trade negotiations still in progress.

Economic Events in Focus (AEST / GMT+10)

Public holiday in Japan, South Korea
11:00 – New Zealand commodity price index (ANZ)
11:30 – Australian building approvals
11:45 – Chinese services PMI (Caixin)
15:45 – Swiss unemployment
17:35 – Swiss National Bank (SNB) Vice Chairman Schlegel Speaks
18:00 – EU HCOB Eurozone Composite PMI (Apr)
18:30 – UK S&P Global Composite PMI (Apr)
19:00 – EU PPI (MoM) (Mar)
22:30 – Canadian trade balance (Mar)
00:00 – Canadian Ivey PMI (Apr)

CI Gold Q2

Gold Futures (GC) Technical Analysis

Gold snapped a four-day losing streak on Monday, delivering its best daily gain in two weeks at 2.4%. Friday’s inverted hammer candle — which was also an inside day — signalled hesitancy for the sell-off to continue or for prices to retest the April high. Support has since been found at the 20-day SMA, and momentum has realigned with the well-established bullish trend on the daily chart. Given gold had already fallen 8.5% from its record high in just seven days, a bounce almost feels overdue from a market that has repeatedly scalded bulls this year.

Traders will now watch closely to see if this rally can extend beyond short-covering and stabilise above key support and resistance levels.

WTI Crude Oil Futures (CL) Technical Analysis

Crude oil was back in the headlines over the weekend after OPEC+ announced another surprise output increase, catching markets off guard. My bearish bias on WTI crude, outlined on 23 April, played out well, with prices breaking below key support zones. However, the much-watched $60 area failed to provide meaningful support, and prices have now slipped toward the $57 handle.

That said, Monday’s daily candle resembles either a doji or hammer, both of which are potential reversal signals. This could mark the start of a bullish mean reversion, especially as price action becomes stretched and sentiment tilts heavily bearish.

And given that prices held above the April low and closed above the June 2023 low on Monday, alongside a bullish RSI (14) divergence, these are not levels that bears may want to linger around. Yes, fundamentals ultimately drive price, but if OPEC’s output increase was supposedly so bearish for oil, why is WTI crude still trading above recent swing lows?

This disconnect between narrative and price leads me to suspect a period of bullish mean reversion is due. Should that unfold, it could bring the December low at $59.31 and the $60 psychological handle back into focus — an area that also aligns with the split VPOC (Volume Point of Control) at 60.54.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.