WTI outlook: Oil prices extend rebound after NFP
After a big drop earlier in the week, WTI has staged an impressive bounce off their lows in the last couple of days. Yet it remains to be seen whether this crude oil rally is driven by just short-covering, or actual buying in the hope that prices have bottomed. If we do get some confirmation, this would certainly boost the WTI outlook, especially in light of the OPEC’s big supply cuts and falling US oil inventories.
Given that it is an NFP day, traders usually tend to lighten up on their positions ahead of the data release. So, it is quite reasonable to attribute the earlier recovery to short-side profit-taking from speculators. But after the release of the data, oil has continued to push higher, suggesting that perhaps the market had overestimated the downside risks to demand.
In fact, we have seen a similar bullish reaction across some other risk assets, with European indices and US futures rallying in the first half of the session. If the markets close around current levels or higher, this will point to continued strength in the week ahead.
In recent days, tumbling regional bank stocks, mixed global data and a sharp slide in crude oil prices all had highlighted financial stability and recession risks. But in pre-market, shares of troubled lenders like PacWest Bancrop, Western Alliance Bancorp and First Horizon Corp were all up sharply after a bruising week. The major indices then rallied further on the back of a strong NFP report.
WTI outlook: Technical analysis
Today’s gains come hot on the heels of the hammer-looking candle WTI formed on its daily chart after its earlier dip below the March low at $64.46 proved to be short-lived. Was that a false break reversal? Judging by the upside follow-thru above $70 today, it looks that way, but more price action is needed to confirm.
WTI faces potential resistance around $71.35 (which was being tested at the time of writing) and then just below the $74.00 handle where it had previously found interim support, before the big drop. If it manages to recapture these levels, then the bulls will become more confident in buying the dips in the week(s) ahead.
The bullish-looking price action from Thursday has encouraged dip buyers to step in aggressively today, while the bears have probably also rushed for the exits. As a result, we have seen a 3% or so rebound in oil prices, boosting bullish hopes that prices may have bottomed. But the trend is bearish, so the onus is on the bulls to show willingness that they are happy to remain in control of price action.
Going forward, dips back to support levels around $70.00, $69.75 and at worst $68.00 will now need to hold, for otherwise the bulls will be in trouble again – as we saw with the prior such ‘bullish’ candles in the last week of April.
How to trade with City Index
You can trade with City Index by following these four easy steps:
-
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024