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Crude oil leads commodities rebound

By Margaret Yang, CMC Markets

Commodities rebound despite of strong dollar

Crude oil prices rebounded over 5% last night, largely on renewed hopes for OPEC production cut in a meeting later this month. The recent drop in crude oil prices led OPEC members to re-assess the necessary and urgency to freeze production in order to reduce a supply glut. This expectation may once again trigger a wave of short covering activities. As US dollar climbed to a 12 months high and getting closer to strong resistance zone, the marginal effect of a stronger USD to the commodities prices may diminish in the near term. Technically, the immediate resistance and support level for WTI Dec contract could be found at $45.90 and $43.80.

Gold price rebound from a six-month low of $1,210 to $1,226 yesterday, with an immediate support and resistance level at $1,193 and $1,240 respectively. Silver also climbed to $17.09 after hitting as low as $16.60 a day ago. Platinum rebounded to $943 from $930, forming a “double bottom” pattern.

Dollar remains strong as Dec rate hike probability surges to 94%

US dollar index advanced further to 100.20 this morning after hitting a 12-month high of 100 a day ago. Crude oil and precious metal prices rebounded sharply last night after four days of “Post-election selloff”. Probably too much expectation of Dec rate hike has been priced-into the Federal fund future – implied probability of Dec rate hike has surged to 94%, which results in some profit taking and unwinding activities in Asia market yesterday. Technically, 100 is still a critical resistance level and we might see some consolidation around here.

HK market closed 0.46% higher led by financial and telco sectors as the clock is ticking faster for the launch of HK-SZ link. Meanwhile, southbound funds flowing into HK stock market via HK-SH link accelerated over the last two days, showing rising interest from mainland investors after the recent selloff. Trading activities will probably pick up anticipating the launch of HK-SZ link this month.

Crude Oil WTI Dec 2016