Crude Oil Analysis and Talking Points
- The US dollar is looking to the Federal Reserve for guidance.
- OPEC + stands firmly to support oil prices.
- The major inflection point is being tested with focus on the 200-day moving average.
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Basic crude oil background
WTI Crude Oil enjoyed a largely positive week ahead of next week’s Fed rate decision as there is optimism about a possible peak in the interest rate cycle. Markets (see table below) Quotation with near 100% certainty a 25 bits per second Rising (which I don’t expect to change) but future guidance from the Fed will be key to the short term direction.
Futures implied funds
Source: Refinitiv
From a crude oil perspective, Baker Hughes platform stats showed another decline which affected supply side concerns which is contributing to higher crude oil prices. Crude oil inventory change data from both API and EIA came out different from estimates but still negative in conjunction with optimism about the Chinese economy via additional stimulus, which led to higher crude oil prices. Despite the fact that the US dollar has strengthened (a traditional inverse relationship with crude oil), the aforementioned determinants of oil have canceled out this negative effect.
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OPEC+ ministers emphasized their agility and flexibility at the OPEC International Symposium saying they are constantly monitoring market dynamics and will take any necessary measures to support the oil market.
The coming week will be filled with high impact economic data (see calendar below) other than the FOMC announcement with a focus on the Fed’s preferred inflation measure (core PCE price index) which could follow the previous CPI report revealing less inflationary pressures on the US economy. If this materializes, crude oil prices could receive another boost from the weakness of the US dollar.
Economic calendar (GMT +02:00)
source: DailyFX Economic Calendar
Technical Analysis
WTI Crude Oil daily chart
Chart created by Warren VenkitasI.G
Price action in the WTI daily chart above, as the bulls tested the 200 day moving average (blue) coinciding with the channel resistance (black) that has held since August 2022. With the RSI near overbought levels, this could be a sign of another pullback lower as it was in early April. This brings 75.00 Psychological dealings in focus from a bearish perspective. Bulls will be looking for a confirmation close above this major resistance area which they can consider 80.00 level.
Introduction to technical analysis
Moving averages
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Key resistance levels:
- $80.00
- channel resistance
- $77.30
- 200 day MA
Key support levels:
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Client Sense: Up
IGCS shows that retailers are long net with crude oil 55% of traders who are currently holding long positions (as of this writing). At DailyFX we usually take the opposite view of crowd sentiment. However, due to the recent changes in long and short positions, we are in a short-term bullish trend.
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