Trader reaction to the long-term 50% level at $72.31 is likely to determine the direction of the January WTI crude oil market on Friday.
Bullish Scenario
A sustained move over $72.31 will indicate the presence of buyers. This could lead to a test of the minor top at $75.44. Taking out this level will change the minor trend to up and could trigger an acceleration into the short-term Fibonacci level at $78.72.
Bearish Scenario
A sustained move under $72.31 will signal the presence of sellers. This could trigger an acceleration to the downside with $63.73 the next major target.
Bullish Scenario
A sustained move over $72.31 will indicate the presence of buyers. This could lead to a test of the minor top at $75.44. Taking out this level will change the minor trend to up and could trigger an acceleration into the short-term Fibonacci level at $78.72.
Bearish Scenario
A sustained move under $72.31 will signal the presence of sellers. This could trigger an acceleration to the downside with $63.73 the next major target.
Comment:
Volume is light at the start of the week with many long traders trying to recover from a massive sell-off that drove prices down over 10% for the week and took them to their lowest level since December 2021. The catalysts behind the selling pressure were concerns that a possible global recession will impact oil demand.
Comment:
Gains were capped by hawkish comments from Fed Chair Jerome Powell.
“Our focus right now is really on moving our stance to one that is restrictive enough to ensure a return of inflation to our 2% goals over time, it’s not on rate cuts,” Chair Jerome Powell said at the news conference following the Fed’s latest policy-setting meeting.
“Our focus right now is really on moving our stance to one that is restrictive enough to ensure a return of inflation to our 2% goals over time, it’s not on rate cuts,” Chair Jerome Powell said at the news conference following the Fed’s latest policy-setting meeting.
Comment:
In economic news, oil traders were hit with more bearish news from the United States where Flash Manufacturing PMI fell from 47.7 to 46.1 and Flash Services PMI dropped to 44.4 from 46.5. Both figures indicate their respective sectors are in contraction.
The weakening manufacturing PMI data suggests a drop in demand is forthcoming.
The weakening manufacturing PMI data suggests a drop in demand is forthcoming.
Comment:
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading flat on Monday after giving back earlier gains. Underpinning the market shortly after the opening was optimism over demand recovery due to China’s easing of COVID-19 curbs and the United States’ decision to replenish its Strategic Petroleum Reserve (SPR) by buying back oil. The two news stories are offsetting global recession fears.
Traders are monitoring the movement in the U.S. Dollar since it is likely to respond to the figures that could influence the Fed’s interest rate decision at next week’s 2-day meeting. A stronger greenback tends to weigh on foreign demand for dollar-denominated crude oil.