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Crude Oil Lifted as US CPI Remains Stubbornly High and Risk Aversion Hits Equities

Crude Oil Lifted as US CPI Remains Stubbornly High and Risk Aversion Hits Equities

Daniel McCarthy, Strategist

Crude Oil, US Dollar, US CPI, Fed, USD/CNY - Talking Points

  • Crude oil prices find support after US CPI beats expectations
  • APAC equities come under pressure as higher rate reality kicks in
  • If the Fed is tightens’ more aggressively, where will that leave WTI?

Crude oil found support overnight in the face of a strengthening US Dollar after year-on-year US CPI came in at 8.3%. It beat expectations of 8.1% but was below the previous annual number of 8.5%. Crude has since softened in the Asian Session today.

After the CPI number, Wall Street resumed its descent overnight with the Nasdaq leading the way, down over 3%. Asian equities have followed the lead and are all in the red today.

After the CPI number, St Louis Federal Reserve President James Bullard said that 50 basis points hikes seemed appropriate and that 75 basis point hikes were not his base case.

The market has priced in 50 basis points lifts at the June, July and September meetings of the Federal Open Market Committee (FOMC) meetings.

Former Federal Reserve Bank of New York President Bill Dudley also weighed in for the Fed to be more aggressive, calling for the Fed to raise beyond neutral.

In the wash-up, Treasury yields slipped lower again as the flight to quality persisted. The 10-, 20- and 30-year notes were 7-8 basis points lower in yield.

Despite the evidence of persistent inflation, gold remains steady at around US$ 1,852 an ounce. The iron ore price and industrial metals in general also had a quiet day after recent weakness.

USD/CNY resumed its march north, trading above 6.7600 today.

Federal Reserve Bank of San Francisco President Mary Daly is due to give a speech later today.

The full economic calendar can be viewed here.

WTI Crude Oil Technical Analysis

Crude oil continues to trade within a broad range after a 5.96% rally yesterday.

This continuing steadiness has seen the 10-, 21- and 55- day simple moving averages (SMA) converge near the current price.

This consolidation has seen volatility decrease as illustrated by the narrowing of the 21-day simple moving average (SMA) basedBollinger Bands.

Resistance could be at the previous highs of 111.37, 116.64, 129.44 and 130.50.

On the downside, support may lie at 95.28, 93.53, 92.93, 90.06 and 87.46

Crude Oil Chart

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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