Bears control oil pending Fed decision

Bears control oil pending Fed decision

  • The trapped bulls panic as the bears take control.
  • A 38.2% Fibonacci retracement could lead to further gains.
  • The target measured at 100% is expected to be $75.00 in the coming week.

WTI (West Texas Intermediate) oil price is down more than 1% on the day and is trading near $78.50 at time of writing after dropping from a high of $80.44 to a low of $77.91 on the day, ending the bullish trend . start the year towards the end of the month and after its first weekly loss last week in a year so far.

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Analysts at ANZ Bank say technical factors played a role: Brent oil futures did not hold above the 100-day moving average. However, according to them, “the market remains supported by what the opening of China will mean for demand.”

“Fund managers have increased their bullish positions in Brent oil to the highest level in 11 months. Spot prices returned to premium levels with futures, signaling that demand will outstrip supply,” the analysts added, noting that in China, “travel hit 90% pre-pandemic levels during spring break. Last week, domestic air travel was also up 80% year-over-year.”

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Meanwhile, oil prices are lower on Monday as investors are cautious ahead of an expected hike in US interest rates this week. The Fed is gathering, and the market’s hawkish reaction to the market’s idea that a Fed reversal is around the corner is keeping investors on the sidelines and looking to profit from their positions prior to the event. The Federal Reserve is expected to raise US interest rates by 25 basis points, keeping recession fears on the minds of investors.

The fall in oil prices comes despite growing geopolitical risks in the Middle East after a drone attack on a munitions factory in the Iranian city of Isfahan. Israel is blamed for the attack, according to the New York Times.

In other countries, there are concerns that markets will find it difficult to adjust to EU sanctions on petroleum products. TotalEnergies has warned that Europe continues to be threatened by a shortage of diesel fuel.

Analysts at TD Securities say CTA trend followers are best positioned in petroleum products, including heating oil and RBOB gasoline, ahead of the EU’s ban on Russian fuel imports, although recent algo selloffs have further weakened gasoline cracking spreads.

“The EU fuel ban continues to create uncertainty over fuel availability in the coming months, but robust Russian exports fall short of expectations of looming disruptions,” analysts said.

“However, additional long CTA acquisitions above the $2.62 per gallon range in gasoline can be expected, although CTA is already approaching its maximum effective length in fuel oil.”

Technical analysis of WTI oil

In the meantime, traders in New York lacked the blocked volume, which rose at $79.40/50. leading to a sell-off during trading hours before a short squeeze on Wall Street’s open liquidity:

oil WTI January 30, 2023

However, with the Fed exiting this week and with daily M formation and trend line support, we may see some consolidation over the next few sessions:

oil price January 30, 2023

That being said, a resistance correction could prompt captured long positions to exit loss-making or break-even positions and then open short positions in the market around 38.2%. a week:

WTI Oil Price January 30, 2023

Ross J. Burland, FXStreet

Ross Berland started his career in the Forex market in the City of London in 2001. Initially working for the FX department of Sucden (UK) Ltd as a Corporate Seller and Junior Dealer (FSA Qualified Investment Advisor), Ross ended up in institutional Forex spot trading. before being hired by Investec Bank’s Gresham Street foreign exchange department as a sales/trading client, specializing in corporate cash management and specialized finance.

The opinions expressed here are solely those of the author and do not necessarily reflect the views of Forex Quebec. Every investment and trading move involves risk, so you should do your own research when making a decision.

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Disclaimer: The information and opinions contained in this report are for general information only and do not constitute an offer or solicitation to buy or sell foreign exchange contracts or CFDs. Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness and accepts no liability for any direct, indirect or consequential damages that may result from anyone relying to such information.

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