The commodity started the week on the front foot, looking past poor data from China, the world's second largest consumer of oil, but fears of stagflation returned after poor results from major US retailers, causing SPX500 to post its worst day since the pandemic yesterday.
This knocked USOIL down as well, preventing it from moving past 116.66-93, as we had warned in our previous analysis. Today, it stays on the back foot as sentiment remains downbeat, which creates heightened risk of a return below the EMA200, around which it has been gyrating for a while now.
This could open the door for fresh May lows (98.81), but its recent visits below the EMA200 have been short-lived and we don't see yet a compelling reason for this to change.
USOIL has been making slow progress and trades in the red this week, but runs its sixth consecutive profitable month and risk is skewed to the upside. As such, it can make another effort towards 116.66-93, but it does not inspire at this point for daily closes above it, that will open the door for 122.04.
The commodity may struggle for firm direction in the near term, since there are no major economic releases ahead, but caution is needed, as markets are fragile, grappling with prospects of stagflation.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.