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Oil rallies, as gold tanks
This time, both OPEC and non-OPEC producers are well decided to sustain the recovery in oil prices. The slowdown in oil recovery and last week’s downside correction apparently displeased Saudi Arabia and brought the world’s leading oil producer to unexpectedly signal a larger output cut than previously agreed on November 30th Vienna meeting. In addition, Russia reiterated its plans to pump lower quantities in 2017. Both the Brent and the WTI gapped higher at the open and rallied past 4% in Asia. Decisive comments from the supply side could encourage a further rise of the price of a barrel of WTI to $55, before $58.15 (major 38.2% retracement on Jun’14 to Jan’16 drop).

The Canadian Dollar (+0.40%) and the Norwegian krone (0.41%) have been the leading gainers against the US dollar.

Improved risk sentiment drove the cash out of the Swiss franc and the yen. The USDJPY rallied to 115.71 in Tokyo. The positive trend should see support at 115.00 (optionality), 114.60 (minor 23.6% retracement on Nov 28th to Dec 12th surge) and 114.00/113.99 (200-hour moving average / major 38.2% retrace).

The EURUSD rebounded from 1.0520, a touch above the Nov 24th low of 1.0518. Traders remain seller on the rallies as the US dollar appetite remains firm before this week’s FOMC meeting. The divergence between the Federal Reserve (Fed) and the European Central Bank (ECB) monetary policy outlook is supportive of a further downside push to 1.0460 (March 2015 low), and below.

The GBPUSD treaded water in a tight range of 1.2546/1.2599, around the 50% retracement on Nov 28th to Dec 6th rise. Resistance remains solid at 1.2625 (major 38.2% retrace) and the GBPUSD could potentially aim for a daily close below 1.2610 (downtrend channel top). Intra-day support is seen at 1.2533 (major 61.8% retrace), 1.2476 (minor 76.4% retrace) and 1.2450 (channel base).

Gold extended losses to $1154 in Asia. Selling pressures remain tight as improved US yields continue driving cash from the yellow metal to fixed income products. The US 10-year yield is testing 2.50%. There is room for a further fall to $1150/1145 moving into the FOMC meeting.