March crude oil fell $3.83 to $58.99 last week, resulting in a weekly outside bearish reversal after prices almost reached their one-year high. Technically speaking, such behavior would normally point to lower prices ahead, but fundamentally, the situation with Iran remains tense and ships going through the Strait of Hormuz are vulnerable to getting caught in the conflict. Last week's downward turn in the weekly stochastic also suggests lower prices, but this may be one of those situations when technical advice should be put on hold until the risk of increased conflict subsides.
Gold is a commodity that tends to trade higher during times of conflict, and that has been true again lately. February gold closed up $7.70 last week at $1,560.10, near its highest spot prices in six years. Fundamentally, gold prices have benefited from the low interest rate environment, and more recently, the threat of an escalated conflict with Iran. Technically speaking, noncommercial net longs are near their highest level on record, a potentially bearish situation, should anything disappoint all those bullish speculators. For now, February gold prices remain in an uptrend with support at $1,453.00.
U.S. dollar index:
In spite of concerns of an increased conflict with Iran, the March U.S. dollar index was up 0.56 last week, ending at 97.08. Normally, this kind of situation would cause traders to back away from the dollar, if they were genuinely concerned about a serious conflict, but that does not seem to be the case here. Technically speaking, the U.S. dollar looks quite bullish after recovering from a new five-month low on the final day of 2019. Since then, prices have rallied a full point higher and turned the weekly stochastic indicator up, a bullish sign of changing momentum as the U.S. dollar continues to be a popular choice among investors.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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