WTI is meeting resistance in the sixth day of trade since bulls took back charge at the start of 2019, with the price rising from the 46 handle to a high of 52.98 today. The price of oil got a lift due to the Saudi Energy Minister Khalid Al-Falih expressing confidence over the production curbs by the OPEC+ coalition that kicked in this year. However, there is a cautious tone hanging over the market which is likely to leave a bearish mark over risky asset classes such as oil. Ears are on the ground for sound bites from ongoing trade talks between the U.S. and China, Brexit progress and indeed the US government shutdown as a result of the dispute over ‘the wall’.
There is a lack of detail on all fronts for the market’s to chew on which leaves the near term protects of the price of oil down to the value of the greenback. The US dollar is breathing higher following an interim bearish channel following Powell’s remarks last week and subsequent Fed speak since as well as the FOMC minutes. The sentiment surrounding the Fed comes with a cautionary tone which will likely see the Fed pause on its rate hike path if there are signs of an economic slowdown. Powell clarified this today when speaking at the Economic Club of Washington, expecting inflation to stay around 2% this year, but appearing somewhat concerned about global growth and how that could impact the rate of growth domestically. However, it may be that the markets are more cautious than the Fed on this front, and a March rate hike is not off the table either.
A sudden switch up in sentiment could bring back volatility and put a spanner in the works for risk appetite, ultimately weighing once again on the price of oil. However, should the global growth picture look more positive, at the same time that supply is being tightened through commitments to cut production, that would be a bullish factor for oil.
A daily doji is in the making around the 50-D SMA, and should be a warning to bulls tracking the five consecutive session rally as bulls move through the space between the 38.2% and the 23.6% Fibo of the Oct decline. However, on the upside, and on a break of the 50-D SMA, the ultimate objective being the 55 handle through a cluster of fractals on the 4 HR charts and R3 located at 56.09. Both RSI and MACD are turning neutral on the same time frame, pausing to a correction. A break of the pivot of 51.84 opens S1 at 50.83 and exposes the psychological 50 figure below the 23.6% Fibo in the 50.50s. 48.20 is a key confluence support area to target.