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WTI FUNDAMENTAL SURVIVAL
Crude Oil enjoyed a rebound following the European open this morning supported by a weaker dollar. The Asian session saw WTI struggle in the absence of Chinese traders, as markets remain mixed over a possible demand surge following China’s reopening.
Oil prices continue to benefit from a softer USD recently as markets come to terms with the potential tariffs ahead. Before the Fed idle period began last week, we heard from a slew of Fed policymakers favoring more rates while highlighting the dangers of persistently high inflation. Currently, markets appear to be taking Fed policymakers’ rhetoric with a pinch of salt, as the USD continues to weaken as markets assess the likelihood and magnitude of further rate hikes.
Traders continue to assess the impact of the ban on Russian Oil with the US Treasury announcing on Friday that a review of the price cap will only take place in March along with its G-7 counterparts. The delay will allow the full impact to be felt and the G-7 nations to respond accordingly with the possibility of a limit on oil products from Russia still on the table.
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China remains a key driver for oil prices as markets hope the reopening will spark a fresh surge in demand. This initial optimism led to the recent rally back above the $80 barrel mark. Next week promises to be interesting as China celebrates the Lunar New Year, the question will be… Can WTI sustain its further momentum in the absence of Chinese traders and data?
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From a technical perspective, WTI is headed for its third consecutive day of gains since retesting the trend and bouncing off the 50-day MA. Price action continues to print higher highs and higher lows since printing its YTD low on December 9th while a new higher high seems on the cards for now. A daily candle close above the 100-day MA at $82.15 opens the possibility of a higher run to the $85 per barrel mark. A bullish structure remains intact with a daily candle close below the $79 mark needed to indicate a change in structure.
Alternatively, a rejection of the 100-day MA and a possible return of some US dollar strength could see us push lower back to the 50-day MA.
WTI Crude Oil Daily Chart – January 23, 2022
IG CUSTOMER SENTIMENT DATA: MIXED
IGCS shows that retail traders are currently Long on Crude Oil, with 61% of traders currently holding long positions. At DailyFX we usually take a contrary view to mass sentiment, and the fact that traders have long suggested that Crude Oil may continue to fall.
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda