WTI: bulls in control to hard resistance, technically leaning bullish
- WTI: hitting hard resistance as dollar pulls back.
- WTI: reverses earlier losses and core geopolitical fundamentals.
Oil has been consolidating on the daily sticks since a YTD high of $69.50bbls WTI was hit on 18th April. $66.83 has been the low of this sideways channel, just above the current 21-D SMA at $66.80. For today, WTI has been rallying from 67.13 lows to a high of $68.53, with spot trading at $68.02 at the time of writing.
The upside comes in tandem with a recovery on Wall Street (WTI/S&P 500 correlate positively, but this is a point of contention among economists). The reflation trade has come under the scrutiny of late with the recent resurgence in the greenback.
The dollar has eased back and that has lifted the mood in EM's and the commodity complex after yesterday's outcome fo the FOMC two day meeting where observers concluded that the Fed is not in any rush to hike rates at a faster pace than what was already been priced in to the market, and the odds of a fourth rate hike before the year is out have diminished, consequently weighing on rates and the US dollar, (US 10yrs yields -0.82% at 2.94%, DXY -0.13% at 92.3950 from a high of 99.8880).
What fundamentals are at play?
In the background, the fundamentals at play are geopolitical, as always, with respect to Iran and Trump's reluctance to entertain 'the nuclear deal'. Another factor boosting the price of oil is the International Monetary Fund’s threat to expel Venezuela will lead to tighter global crude supplies. These concerns have reversed the earlier weakness that was driven by recent data showing a hefty climb in weekly crude supplies and record U.S. production.
Oil levels
The charts are bullish, although the hourly RSI is overdone and has turned low before overbought territory, while the 4-hr stick's RSI still has room towards 70 as price seeks out the halfway point on the 68 handle where there is a descending resistance line top from 19th April highs capping the rally. To the downside, 67.61 support meets the 10 and 100-4hr SMA. 66.80 comes in below there as recent lows in the consolidative channel.