Trade idea: Crude Oil
The stars aligned for oil yesterday as many factors worked in the black liquid’s favour: 1) In their monthly report, the IEA projected a significant increase in global oil demand as we move into the latter half of this year. 2) 3rd week in a row of crude inventory drawdowns with a particularly large drawdown yesterday, significantly above expectations 3) Weakness in the dollar 4) A bit more of a hawkish tone from Iran which could ruffle some feathers and keep sanctions in place. 5) Another drone attack on Saudi Oil Facilities for the 2nd time in a week, raising the geopolitical risk premium.
The technicals show a decisive break above the $62-65 range crude found itself in for the past 3-weeks. Both shorter-term moving averages – 21-day EMA and 50-day SMA look to be turning up from their sideways movement. The RSI has perched its head above the key 53 resistance level. It will need to remain above this “line in the sand” to continue its ascent higher. The first big price target higher comes in at $67.5, with further moves needing to break $69 to move back into the ascending channel. Once those levels are cleared the March 8 highs of $71.37 come back into play. To the downside I’d monitor the former range resistance which could now act as support around $65 (modestly above 21-day EMA and 50-day SMA). Below that the $62 range support would come into play. If price broke below the March 23 low of $60.3 then we could see some large selling given the lack of technical support until $56.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.