USOIL in Perilous Sate as Markets Monitor Data & Covid News from China

  • USOil
    (${instrument.percentChange}%)

USOIL Analysis

Oil prices rebounded last week, mostly on optimism around a slowdown in the pace of rate hikes by the Fed and an easing of the strict Covid-19 rules in China. Big cities such as Beijing have ditched some pandemic requirements, as the world second largest consumer of oil softens its zero-Covid strategy, but infections remain high.

The economic impact from the pandemic disruptions has been evident in recent releases from China and today's trade figures were disappointing. Export and imports in USD terms, both contracted again in November, with their steepest declines since early 2020.

Meanwhile, recent data from the US, such as GDP, the Jobs report and Monday's services activity and factory orders point to a robust economy. This has firmed up again expectations around the Fed's rate hike path, which helps the USDOLLAR and sends USOil lower this week.

On Friday, the European Union had agreed on a $60 price cap on Russian seaborne oil [1], while on the supply side, OPEC+ opted against deeper production cuts. The group maintained its October decision to decrease output by a massive 2 million barrels/day. [2]

USOil sets fresh 2022 lows and is now in risk of breaking below the 200Weeks EMA (at 72.00-50), although we remain cautious around sustained weakness below this level. In any case, such a break would bring 62.41-61.72 in the spotlight.

The Relative Strength Index (RSI) points to oversold conditions which can limit the drop and give USOil a chance to react higher. However, a recovery above the 200EMA (mid-82.00) that would pause downside bias, would need a strong catalyst.

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Nikos Tzabouras

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.

References

1

Retrieved 07 Dec 2022 https://ec.europa.eu/commission/presscorner/detail/en/IP_22_7468

2

Retrieved 01 Feb 2023 https://www.opec.org/opec_web/en/press_room/7060.htm

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