FX.co ★ 27.09/2022: Oil prices fall but set to rebound. Outlook for oil, gold, RUB

27.09/2022: Oil prices fall but set to rebound. Outlook for oil, gold, RUB

Despite growing worries about energy shortages, oil prices are still below $90 per barrel. This is due to a strong dollar. Its rally turned out to be so impressive that it affected not only the foreign exchange market but also other segments of the financial world, including the commodity market.

Thus, we are still witnessing an inverse correlation between the US dollar and almost all other instruments. Besides, oil is trading under pressure from rising recession fears or, more precisely, fears regarding its depth and duration. The overwhelming concern is that a decline in demand, including for oil, will ultimately turn out to be quite spectacular. That is exactly what is currently limiting oil prices’ bullish run. In addition, the European Union has not been able to come to a unanimous agreement on a price cap on Russian oil exports, which could provoke an even more acute energy crunch.

From a technical point of view, Brent crude oil futures continue to trade downwards, periodically hitting new local lows. At the moment, the 83.50 level acts as variable support, where a pullback may occur. If the price fixes below this area, it will most likely head for the 80 mark.

Gold also came under pressure from the dollar's meteoric rise, with prices dipping to their lowest levels since March 2020. If there is no strong rebound in the foreign exchange market in the near future, the yellow metal may well extend losses, falling below $1,600 per ounce. The level of 1,620 acts as variable support on the way of sellers. However, even in the best-case scenario, a rebound is likely to be short-lived, followed by a resumed decline.

Such dynamics can be attributed to monetary policies pursued by major central banks. Judging by the statements of ECB members, the regulator will maintain its aggressive tightening path. As for the Bank of England, analysts predict that Britain’s central bank may soon hike its refinancing rate at an unscheduled meeting. All this will lead to a jump in borrowing costs. This means that market participants will have to cut their positions, especially on those instruments that have recently seen their worst performance, including gold.

The ruble continues to show incredible resilience to political turbulence. Moreover, it managed to advance slightly. Despite the dollar's rally across the board, the Russian currency remains around 58 rubles per dollar. This is due to the restrictions on transactions and settlements in dollars and euros, as well as gas and oil sales for rubles and currencies of friendly nations. However, the strong ruble makes Russian exports more expensive. Only the Ministry of Finance with its foreign exchange interventions is able to somehow change the situation, but it is still inactive. Moreover, the draft budget for the next year contains no specifics regarding these interventions. And the Ministry of Finance remains silent. Against this background, the ruble has every chance of extending gains.

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