Stocks Rebound as Oil Surges; Dollar and Gold Hold Steady

U.S. Markets

U.S. stock futures edged lower Thursday morning after the major averages logged gains in the previous session. Futures tied to the S&P 500 slipped 0.20%, while Nasdaq 100 futures fell 0.24%.

Stocks rebounded on Wednesday, supported by stronger than expected Private sector employment. Jobs increased by 63,000 in February, and pay was up 4.5% year-over-year, according to the February ADP National Employment Report. The S&P 500 closed 0.8% higher, while the tech-heavy Nasdaq 100 advanced 1.5%.

Semiconductor stocks led the move higher, with Nvidia rising more than 1%. Other chipmakers, including Broadcom, Micron Technology, Advanced Micro Devices, and Intel also posted gains. Meanwhile, consumer staples, energy and materials were the only sectors in the S&P 500 that ended the session in negative territory.

Investors are also monitoring geopolitical developments. U.S. Defense Secretary Pete Hegseth said Wednesday that the U.S. is “winning decisively” in its conflict with Iran and noted that additional forces are being deployed to the region. Separately, Treasury Secretary Scott Bessent said the 15% global tariff recently announced by Donald Trump is likely to take effect later this week.

On the corporate front, investors are awaiting earnings from Kroger, Burlington Stores, and BJ’s Wholesale Club before the opening bell. After the market close, results are expected from Costco and Marvell Technology. On the economic calendar, weekly jobless claims data is also scheduled for release later Thursday.

From a technical perspective, the index is trading below the 9 and 21 SMA on the daily chart. The daily 5 period RSI is near 46, indicating a slightly higher buying sentiment among investors. The index has also rebounded from the 100 SMA on the daily chart. On the 4-hour chart, immediate support is at yesterday’s low of $6,765, followed by the 3rd March low of $6,710. Immediate resistance is at the 200 SMA of $6,900, followed by $6,970.

U.S. Dollar Index 

Today, the dollar added 0.30% to 99.07. Amid a rally pause on Wednesday, the DXY closed lower by 0.33% at 98.77.

Yesterday, Investors curbed aggressive dollar buying after reports indicating that Iranian intelligence operatives were open to negotiation with the CIA, reports that were denied by Tehran. Further indications of de-escalation came from insurance broker Marsh, which is negotiating with U.S. officials to restore marine traffic through the Hormuz Strait.

Meanwhile, the euro is still under pressure as money markets are now pricing in the possibility of an ECB rate hike before year-end due to the energy shock reigniting inflation fears. As for emerging markets, the South Korean won briefly breached 1,500/USD for the first time since 2009, a testament to Seoul’s intense dependence on Gulf crude imports. With Gulf crude and product exports still at risk due to the effective closure of Hormuz, the market is still trading the conflict as an inflation shock.

On the chart, DXY is consolidating, hovering around 99.00 as it finds support at the 50-day SMA at 98.55 and remains capped by the 200-day EMA at 99.07. Immediate resistance stands at 99.34-99.47, with 99.68 up next.

EUR/USD remains in a bearish formation. The pair is attempting to base-build around 1.1600 after its violent selloff in February-March, but it is still trading below all of its significant daily SMAs. Stiff resistance stands at 1.1670 at the 200-day SMA, while the 1.1590 area at the 200-day EMA is being tested now. A break lower may drag the pair to 1.1510.

Crude Oil 

Oil extended gains yesterday as traders assessed the consequences of the US and Israeli war against Iran, with Brent climbing toward $84, closing up 0.5%, and West Texas Intermediate near $78, closing up 1.5%. The upside trend remains intact, with WTI and Brent both up 2% in the current trading session. The market's principal concern remains the Strait of Hormuz, with traffic through the waterway all but halted, forcing some producers to start shutting in output and bottling up crude supplies.

Global energy markets have been rocked by the war, which has spread across the Middle East, hoisting oil, gas, and product prices, lifting freight rates, and spawning disruption for producers and importing nations. Storage capacity-driven supply shut-ins in the Middle East have begun. The key question now is how quickly production can return once export routes normalise. Bloomberg estimates suggest that most fields can restart within days, with full capacity typically restored within 2 to 3 weeks. Airlines and other large fuel buyers have been loading up on oil derivatives contracts (higher call option volumes) to keep their bills from spiralling as oil prices hit multi-year highs. US to Asia oil shipment costs hit a record. As of Wednesday, the shipping rate was about $14.50 a barrel, which is almost 20% of the WTI futures price (hovering around $75 yesterday). Also, the backwardation in WTI continues to increase, with WTI’s prompt spread (April-May Futures contract) now at 1.5 and inching closer towards its June 2025 high of 1.69. The Brent-WTI spread dipped yesterday to 6.58 after touching a multi-year high of 6.84. In the US, meanwhile, nationwide crude stockpiles expanded by about 3.5 million barrels last week to reach the highest since last May, according to the EIA report released yesterday.

WTI is well above its major EMAs, with their slopes increasing. The next thing to see is whether the 100-day EMA at $63.01 can cross above and rise above the 200-day EMA at $53.56 to further the bullish momentum. The $73-$75 zone can offer possible support. A resistance test might be around the $78-$80 zone, which includes Tuesday’s high. For Brent, resistance could be near Tuesday’s high of $85, while support is likely at the range formed by Monday’s open of $77 and yesterday’s low of $80. Price action and volatility remain headline-driven, especially regarding the ongoing conflict and its effect on energy infrastructure.

Gold and Silver 

Gold rose by 0.8% in yesterday's session as the dollar pared its gains slightly. As the Middle East war enters the sixth day, it remains only marginally high in today's session. Recent movements in the metal suggest the spike in WTI oil prices has stoked major concerns about a resurgence in inflation. In a week, WTI oil has surged almost 15% to $78, and the dollar index has surged by almost 1.4%. Traders are now pricing in only a 30% chance of a rate cut in June, down from 50% a month ago. High inflation and a stronger dollar are major headwinds for the metal as long as the war continues. Extreme risk-aversion sentiment within investors might also lead to a selloff in the metal amid liquidity needs. Hence, Gold is not behaving as a haven in these volatile times due to these factors. This is also evident in Gold's high structural volatility in recent times, which challenges its status as a haven. The 1-month ATM volatility is close to 30, much above its 100-day average of 23.

Further, ETF holdings, which have been a major driver of Gold's ascent, declined in yesterday's session. ETFs were net sellers of Gold, cutting 100,293 troy ounces from their holdings, bringing this year's net purchases to 1.82 million ounces. 

Technically, Gold is trading at $5,165, above the 21-day SMA of $5,073. A fib retracement drawn from the high of $5,600 to the low of $4,405 indicates the metal is facing strong resistance at the 78.6% level around $5,350. It also tested the 50% level around $5,000 yesterday, and went below the 21-day SMA before recovering at the end of the session. A rising wedge breakdown, which is considered bearish in the near term, is also evident. It can be observed by connecting the lows at $4,403 and $4,854, and the highs at 4,993, $5,120, and $5,322, respectively. If the metal breaches the 50% fib level at $5,000, further bearishness can be expected. Conversely, for it to turn decisively bullish, a close above the $5,203, followed by a close above the 78.6% fib level at $5,350, is required.

Silver is trading at $ 83.15, hovering near its 21-day SMA of $82.13. A fib retracement drawn from the highs of $121.8 to the lows of $70.8 indicates the 50% level of $96.3 is a resistance level. A break above this level is required to push the metal higher towards $102.3. Otherwise, it may find support at the confluence of the 21-day SMA and the 23.6% fib level at $82.84.