Crude Oil Holds the High Ground on US Dollar Weakness. Will WTI go Higher?
Crude Oil, WTI, Brent, US Dollar, API, Turkey, Norway, Powell, Kashkari - Talking Points
- Crude oil lifted as the US Dollar fell on hopes of a less hawkish Fed
- Fed Chair Powell reaffirmed higher rates, but equities and currencies don’t care
- If the Fed raises rates as they say they will, where will WTI go?
Crude oil has held onto overnight gains with the WTI futures contract trading above 77 U.S. Dollars and the Brent contract is trading over 83.50 U.S. Dollars.
Risk assets were generally buoyed going into the Asian session by the perception that Federal Reserve Chairman Jerome Powell was not hawkish enough in his commentary overnight.
Interest rate markets seem to have taken his comments on board, but equity and currency markets appear to be calling the Fed’s bluff.
Oil was further boosted by supplying supply chain issues arising in Turkey, due to the earthquake and in Norway, due to a technical fault.
Furthermore, inventory data from the American Petroleum Institute (API) revealed a 2.18-million-barrel deterioration rather than a build of a similar amount that had been anticipated for last week.
Currency markets have been very quiet through the Asian session after a wild US session that saw the greenback collapse across the board. The Japanese Yen and the Aussie Dollar were the main beneficiaries
Wall Street equities finished higher on the perceived less hawkish comments from Fed Chair Powell. This is despite Minneapolis Fed President Neel Kashkari maintaining that the peak in the Fed funds rate is likely to be near 5.4%.
Treasury yields are steady today, mostly holding on to the gains seen on Monday. The benchmark 10-year note is near 3.65%.
US President Joe Biden gave his State of the Union address after the North American close and while it covered a lot of ground politically, there was little in the address for markets. Inflation got a lot of attention but there was no reference to foreign policy.
Elsewhere, the Reserve Bank of India raised their key cash rate by 25 basis points to 6.5%.
The focus in the session ahead will be several speakers from both the ECB and the Fed.
The full economic calendar can be viewed here.
WTI CRUDE OIL TECHNICAL ANALYSIS
WTI crude oil has rallied to trade back in the range today.
The price is currently near the 10-, 21-, 34- and 55-day Simple Moving Averages (SMA). A significant break above or below these SMAs could signal a build of momentum in that direction.
Further up there could be a significant resistance zone in the 82.48 - 82.72 area, where there are several breakpoints and previous peaks.
On the downside, there could be support at the breakpoint of 74.97. Further down the prior lows of 72.25 and 70.08 may provide support
--- Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.