BRENT CRUDE OIL (LCOc1) TALKING POINTS
- Bleak Chinese outlook weighs on brent crude.
- Stronger greenback keeps brent suppressed in early trading.
BRENT CRUDE OIL FUNDAMENTAL BACKDROP
Brent crude oil opened the trading week lower after last weeks relief rally took prices up towards the $100 per barrel mark. Chinese economic data earlier this morning (see economic calendar below) extended brent’s downward spiral as well as the broader commodities space, hurting demand-side forecasts. In an unexpected move, the Chinese central bank (PBoC) slashed its key lending rate to help stimulate the economy and lessen the blow stemming from their long standing property crisis and the impact of their COVID-19 policies on supply chains. Rate cuts however, are not have the desired effect as consumers and businesses alike are hesitant to take on more/new debt.
Source: DailyFX Economic Calendar
Coinciding with the Chinese data, the U.S dollar has found support as well showing the markets reluctance to completely write off a hawkish Federal Reserve. We have seen some Fed speakers favor more consistent and depressed inflationary numbers before easing off on interest rate hikes which could be a source of today’s dollar upside following on from last week’s stellar consumer sentiment report. With little on the agenda for the rest of the day, brent crude will likely react to dollar and external global macro events, possibly finding some sustenance as markets digest current fundamentals.
Learn more about Crude Oil Trading Strategies and Tips in our newly revamped Commodities Module!
BRENT CRUDE (LCOc1) DAILY CHART
Chart prepared by Warren Venketas, IG
Price action on the daily brent crude chart above shows the inability for brent bulls to pierce above the medium-term trendline resistance (black) while simultaneously trading below the 20-day EMA (purple) once more. As mentioned above, the ack of fundamental stimulus scheduled for today may indulge short-term rangebound moves.
Key resistance levels:
- $101.29 (50% Fibonacci)
- Trendline resistance (black)
- 20-day EMA (purple)
Key support levels:
IG CLIENT SENTIMENT: BULLISH
IGCS shows retail traders are NET LONG onCrude Oil, with 69% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we settle on a short-term upside bias.
Contact and follow Warren on Twitter: @WVenketas