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Commodities stuck in a range ahead of FOMC meeting

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Nick Goold

Gold

A week of range trading for Gold as critical support at $1,932 came under pressure. Traders were wary of taking aggressive positions ahead of this week’s FOMC, so support held, and Gold recovered to record a small weekly gain.

While the market expects no change in US official rates this week, traders expect further rate rises this year, hurting sentiment towards Gold. US bond yields moved slightly higher last week. The 10-year bond yield is trading at 3.75%, while the 2- and 5-year yields are at 4.60% and 3.92%.

Gold should return to life this week with US inflation figures along with Retail Sales, which are likely to result in short-term trading opportunities. While official US interest rates are unlikely to change at this week’s FOMC, any Fed chairman comments will potentially produce large movements. In a week like this, with many market-moving events, it is usually best to look for overbought or overbought conditions and range trade. Using a simple moving average and looking for a gap or a Bollinger band can provide entry signs.

Gold daily chart June 12

Resistance: 1984, 2000, 2032, 2050, 2080

Support: 1935, 1918, 1900, 1889

WTI

Oil prices started the week higher after Saudi Arabia announced a unilateral production cut over the previous weekend. The gains did not last though a strong USD and a lack of news saw range traders sell ahead $75 resistance.

Weaker-than-expected Chinese inflation figures raised the probability of a slowdown in demand, putting pressure on WTI prices. However, the US Department of Energy (DoE) announced plans to purchase an additional 3 million barrels of crude oil for the strategic stockpile.

This week expect more trading opportunities as the market reacts to US data and the FOMC announcement. Considering $70 support has held multiple times, there is an increased chance of higher levels this week. Similar to Gold, looking for overreactions to economic data could present profitable short-term reversal trading opportunities.

XTI daily chart June 12

Resistance: 75.00, 79.00, 82.50

Support: 70.00, 67.00, 65.00, 64.00, 62.00

Great