Oil Prices Soar as Dollar Falls, Brent Nears $80 – 12 July 2023
12 Jul 2023
Before CPI Statistics, Oil Prices Soar as Dollar Declines, Brent Nears $80.
Chinese Stimulus Measures and Supply Concerns Drive Oil Price Surge
In the realm of Asian trade, oil prices experienced a significant surge on Wednesday, as Brent crude approached bullish levels. The spotlight fell on Chinese stimulus measures and the potential increase in U.S. stockpiles.
On Tuesday, crude prices rose in response to the dollar’s decline, reaching a two-month low due to speculations that the Federal Reserve was nearing the peak of its current cycle of interest rates. During the Asian session, the dollar continued its downward trajectory, losing 0.4% against a basket of currencies.
Furthermore, tightening supply resulting from Saudi Arabia’s and Russia’s production curbs provided additional support to oil prices. The price of Brent oil rose by 0.4% to $79.62, marking its highest level since early May.
However, the recent oil price surge was somewhat subdued due to the imminent release of significant U.S. Consumer Price Index (CPI) inflation data. While core CPI inflation is expected to have remained stable, the estimated CPI for Wednesday is projected to reveal lower headline inflation.
If core inflation persists, it is anticipated that the Fed will continue to raise interest rates in an effort to alleviate rising price pressures. During an end-of-July meeting, the central bank is expected to increase interest rates by at least 25 basis points, and some officials have cautioned that further hikes are probable.
Brent Crude Oil Technical Analysis Daily Chart
Technical Overview: Brent Crude Oil Displays Bullish Indicators
Analyzing the daily chart of Brent Crude Oil reveals the following technical aspects:
- Brent Crude Oil is currently trading within an upward channel.
- It is positioned above all Simple Moving Averages (SMA).
- The Relative Strength Index (RSI) indicates bullishness, while the Stochastic oscillator suggests an upward trend.
- Resistance Level: $79.10
- Immediate Support Level: $78.57
How to Trade Brent Crude Oil
Spotting Opportunities for Trading Brent Crude Oil
After trading within a range, Brent Crude Oil found support at the bottom, leading to a swift price rise. Presently, it is trading near a critical resistance zone and has surpassed the high of the previous day. If this zone is breached, further upside potential may be realized.
- Entry Point: Buy at $79.10
- Take Profit: $80.25
- Stop Loss: $78.24
Q: What factors contributed to the surge in oil prices?
A: The surge in oil prices can be attributed to multiple factors, including the decline of the dollar, Chinese stimulus measures, and tightening supply due to production curbs by Saudi Arabia and Russia.
Q: How did the dollar’s decline impact oil prices?
A: The dollar’s decline to a two-month low created speculation that the Federal Reserve was reaching the peak of its current cycle of interest rates. This prompted an increase in oil prices.
Q: What is the significance of the imminent U.S. CPI inflation data?
A: The U.S. CPI inflation data holds significant importance as it will shed light on both core and headline inflation. The Federal Reserve’s response to these numbers could impact future interest rate decisions.
Q: What are the technical indicators for Brent Crude Oil?
A: Brent Crude Oil is currently exhibiting bullish signals, as it is trading within an upward channel, positioned above all Simple Moving Averages (SMA), and has a positive Relative Strength Index (RSI) and Stochastic oscillator.
Q: What levels should traders pay attention to when trading Brent Crude Oil?
A: The resistance level to watch is $79.10, while the immediate support level stands at $78.57.
Q: What trade suggestion can be made for Brent Crude Oil?
A: Traders may consider buying at $79.10, setting a take profit at $80.25, and placing a stop loss at $78.24.