During the Asian session on Wednesday, the USD/CAD pair rebounded after two days of losses, reaching around 1.3590. This uptick is fueled by a stronger US dollar and lower crude oil prices, which put pressure on the Canadian dollar. The decline in Western Texas Intermediate (WTI) oil prices to approximately $80.70 is attributed to...
What awaits the Oil Market in February?
2023-02-01 • Updated
The Backstory
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
However, the lingering question is "will the reopening of the Chinese economy pool enough demand to alter the decline in the outcome of oil price in February?"
How does this affect the Forex market?
Oil prices usually work as a leading indicator for the US dollar. Rising prices lead to inflation increase, which forces the Fed to become more hawkish. As a result, the greenback strengthens.
On the other hand, lower oil prices cool down inflation, making the Federal Reserve to act more dovish. As a result, the USD declines.
What do the charts have to say?
In light of the fundamental breakdown above, we will draw our conclusions from the outlook of price on the charts using price action.
XBRUSD - D1
On the daily timeframe, Brent has been steadily bearish since March, 2022, declining by over 33% from the high. At the present, price has created a downward channel and is currently retesting the trendine resistance. The presence of the 100-Day SMA at that level as a confluence simply makes a stronger case for a bearish continuation from that point.
Analysts’ Expectations:
Direction: Bearish
Target: $80
Invalidation: $90
XTIUSD - Daily Timeframe
On the daily timeframe, XTIUSD formed a rising channel inside a downward channel. The implication of this is that the point of intersection of trendlines from both channels acts as a strong area of resistance. Considering the presence of the 100-Day SMA as an added confluence, it is only logical to expect lower prices on oil over the next couple of days.
Analysts’ Expectations:
Direction: Bearish
Target: $77
Invalidation: $82
Conclusion
Based on the analyses above, it is safe to expect bearish price action of the oil market.
Important
The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.
You can access more of such trade ideas and prompt market updates on the telegram channel
Similar
The Australian Dollar (AUD) rebounds on Monday, despite a slight dip in the US Dollar (USD) and higher US Treasury yields. Investors are eyeing Australian monthly Consumer Price Index (CPI) data for February and US Gross Domestic Product (GDP) for Q4 2023. The AUD gains momentum as the ASX 200 Index rises, especially in mining and energy sectors. Additionally, the Aussie...
Gold prices rose on Monday as the US Dollar weakened amidst speculation about potential Federal Reserve rate cuts starting in June. This weakened Dollar was partly due to improved risk sentiment pushing US Treasury yields lower. Despite facing challenges from declining yields, gold prices recovered to nearly $2,170 per troy ounce, driven by the Dollar's weakness. Federal Reserve Chair...
Latest news
Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...
Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...