WTI stays firm at around $74.00 despite a strong US Dollar

US crude oil benchmark known as Western Texas Intermediate (WTI) records minimal gains after diving toward an eight-week low at $72.30 per barrel on Monday, exchanging hands at around $73.96 per barrel, capped by a strong US Dollar (USD) across the board.

Wall Street’s extended its losses on Monday due to market participants repricing a less dovish Federal Reserve (Fed) as expected. Money market futures estimates 50 bps of rate hikes by the US central banks, which would lift the Fed Funds target to the 5%-5.25% range. Hence, the greenback continues to extend its recovery, as shown by the US Dollar Index, a measure of the buck’s value against a basket of six currencies, up 0.69%, at 103.703.

Since last Friday, WTI has slid 3%, following the robust US employment data.

Even though a strong US Dollar is a headwind for the “black gold,” China’s reopening prospects remain a driver for oil prices, as the International Energy Agency (IEA) Executive Director Fatih Birol reported. Birol commented that producers might reconsider their output policies as China’s Covid-19 relaxation would increase demand for crude. He added, “We expect about half of the growth in global oil demand this year will come from China.”

Oil traders should be aware that price caps on Russian products began on Sunday, as G7 nations, the EU and Australia, agreed on price limits of oil-refined Russian products.

WTI Technical Analysis

Technically, WTI is still downward biased as long as the quote stands below $82.00 PB. Additionally, last Friday’s WTI failure to crack the 20-day Exponential Moving Average (EMA) at $77.65 exacerbated oil’s fall toward the year’s lows, at $72.30, breaking below the January 4 low of $72.50.

Nevertheless, since then, oil has rebounded and is aiming toward the $73.80 area, opening the door for a leg up. Hence, WTI’s first resistance would be $74.00. A breach of the latter will expose the 20-day EMA at 77.64, followed by the $78.00 psychological level, ahead of the 50-day EMA at $78.77. Conversely, WTI’s would resume downwards once it breaks beneath $72.30.