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Crude Oil Forecast: Brent Tests Key $85 Handle Ahead of Data Heavy Week

Crude Oil Forecast: Brent Tests Key $85 Handle Ahead of Data Heavy Week

Warren Venketas, Analyst
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BRENT CRUDE OIL (LCOc1) TALKING POINTS

  • Thin liquidity this morning likely to provide minimal price movement on Brent crude.
  • Key crude oil releases scheduled this week.
  • Emerging symmetrical triangle pattern on daily chart.
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BRENT CRUDE OIL FUNDAMENTAL BACKDROP

Brent crude oil is trading marginally lower this Monday on the back of a stronger U.S. dollar which may be attributed to Friday’s Michigan consumer sentiment beat as well as the overexuberance by markets post U.S. CPI. Today’s trading may be a bit light across global markets due to Martin Luther King, Hr. Day in the U.S., but the week ahead includes OPEC’s monthly oil report, Chinese GDP and industrial production as well as the customary weekly API, EIA and Baker Hughes data.

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From a dollar perspective, the focal point of recent which has been inflation is slowly dissipating due to softening inflation, leaving the labor market under the spotlight. As of now, the U.S. labor market remains tight, giving the Federal Reserve some support to continue raising interest rates albeit at a slower pace. Fed funds futures point to two 25bps increments for the next two meetings in February and March with a relatively high probability (see table below).

FEDERAL RESERVE INTEREST RATE PROBABILITIES

image1.png

Source: Refinitiv

TECHNICAL ANALYSIS

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BRENT CRUDE DAILY CHART

image2.png

Chart prepared by Warren Venketas, IG

Daily Brent crude oil price action shows a developing symmetrical triangle formation (black) while bulls find resistance at the psychological $85/barrel handle. This is a key area of confluence bearing in mind the 50-day SMA (yellow) joins the mounting technical indications. Traditionally, a symmetrical triangle can breakout on either side however, it tends to favor the preceding trend (downward in this case), leaving Brent crude vulnerable to subsequent support zones.

Key resistance levels:

  • 87.28
  • Triangle resistance
  • 85.00/50-day SMA

Key support levels:

  • 82.38
  • 80.86
  • 80.00

IG CLIENT SENTIMENT: BULLISH

IGCS shows retail traders are NET LONG on crude oil, with 59% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning we arrive at a short-term upside bias.

Contact and followWarrenon Twitter:@WVenketas

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

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