- Speculations for further tightening by the Federal Reserve underpin the US Dollar, a headwind for oil prices.
- China’s reopening and Russia expected to cut its oil production capped WTI’s fall.
- WTI Technical analysis: Neutral to downward biased; once it breaks $75.00, a retest of monthly lows is likely.
Western Texas Intermediate (WTI), the US crude oil benchmark, is erasing Monday’s gains which fell shy of reaching the 20-day Exponential Moving Average (EMA), and dropped towards the lows of the week around 75.97 before settling around the current price. At the time of typing, WTI is losing 0.94%, trading at 76.64 per barrel.
Oil prices affected by a strong US Dollar
The strong US Dollar (USD) narrative is hitting the commodities market. During the last week, Federal Reserve (Fed) officials continued their hawkish rhetoric while data supported some of their comments. Traders should remember that although Cleveland and St. Louis Fed Presidents Loretta Mester and James Bullard do not vote in the FOMC, both supported raising rates by 50 bps.
That spurred speculations that the US Federal Reserve (Fed) might hike rates not twice but three times, which could lift the Federal Funds Rate (FFR) to the 5.25%-5.50% mark.
Meanwhile, the US Dollar Index (DXY), which tracks the buck’s value vs. a basket of six currencies, advances 0.29%, up at 104.184, a headwind for dollar-denominated assets. Therefore, a strong USD makes oil prices expensive for foreign countries.
Aside from this, China’s reopening is a factor playing into WTI’s price, and capped oil prices fall in Tuesday’s session. Russia’s announced that it plans to cut production by 500,000 bpd or about 5% of its output in March as retaliation to the West imposing price caps on Russian oil and oil-related products.
Data-wise, US oil inventories and data, which were to be released on Tuesday, was postponed in observance of President’s Day and moved to Wednesday and Thursday.
WTI Technical analysis
From a technical perspective, WTI is still neutral to downward biased, capped by all the Exponential Moving Averages (EMAs) resting above oil’s price. In addition, the Relative Strength Index (RSI) is in bearish territory and is aiming downwards. The Rate of Change (RoC), albeit steadily, shows that sellers continue gaining momentum.
Hence, WTI’s first support would be $75.97. Once cleared, the oil price would tumble to the last week’s low at $75.36, followed by the MTD low at $72.30.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.