WTI Price Analysis: Oil prices rise amid Chinese stimulus, capped by overbought conditions

The West Texas Intermediate (WTI) records a four-day winning streak on Tuesday, but the upside may be limited to technical indicators starting to flash overbought conditions. Chinese economic stimulus supported Oil prices while focus in the markets shifts to Wednesday’s Federal Reserve (Fed) decision.

Earlier in the day, Chinese news agency Xinhua reported that the Politburo - the ruling Communist Party's top decision-making body - announced they will take up economic policy adjustments to raise domestic demand and bolster confidence. As China is the world's biggest oil importer, a more robust local economy would boost energy prices, increasing the black gold price.

On the other hand, all eyes are on Wednesday’s Federal Reserve (Fed) decision. Markets expected Chair Powell to deliver a 25 basis point (bps) hike to 5.25% and a data-dependent message. According to several analysts, as the US economy is holding resilient and the labour market still shows tightness, the Federal Open Market Committee (FOMC) won’t be so comfortable taking off the table an additional hike past July. In that sense, messaging in the policy statement and Powell’s presser will be key.

WTI Levels to watch

According to the daily chart, the WTI’s upside may be limited as indicators leap towards overbought conditions. The Relative Strength Index (RSI) stands in positive territory near 70.00 while the Moving Average Convergence Divergence (MACD) prints green bars since late June, suggesting that a downward correction may be on the horizon. That being said, the overall outlook for the WTI is bullish as it tardes above its main Simple Moving Averages (SMAs) of 20,100 and 200-days and the cross between the 20 and 100 day averages suggest that the bulls are in command.  

Resistance levels: $80.00,$81.00,$82.60.
Support levels: $76.75 (200-day SMA), $73.90 (20-day SMA),$73.50 (100-day SMA).

WTI Daily chart