Crude oil prices are in a major downtrend. Investors should see a small upward bump of 1-2.5% as we get close or into the US trading session. However, investors need to be extremely careful as this bump/rally will be short lived. The BEARISH trend is very strong with crude oil now.
Short-term growth yesterday did not give confidence in a global reversal. Data from the Commodity Futures Trading Commission indicate a continuing decline in speculative crude oil positions over the week from 530.3K to 461.8K.
Last week, OPEC published data on the actual reduction in oil production by cartel countries: in Algeria, production fell to 1.01M from 1.02M, in Iraq it was reduced to 4.54M from 4.57M, in Kuwait the indicator decreased to 2.67M from 2.71M, in Libya it went down to 0.76M from 1.15M, in Saudi Arabia oil production fell to 9.72M from 9.80M, and in the UAE it declined to 2.99M from 3.04M. The overall production reduction is advancing at the planned pace. Crude Oil Stocks reports from API and EIA are scheduled for tomorrow and in the event of serious changes in the indicators, asset quotes may undergo significant changes.
Crude Oil Support and Resistance
The crude oil continues to decline globally, and as soon as there is a growth prospect with the opening of trading in America, the asset drops sharply again, reaching ever new lows. Most indicators are BEARISH.
Resistance levels: 50.90, 53.20.
Support levels: 49.70, 47.00.—?
Crude Oil Trading Ideas
If the oil prices continues to decline, and the price consolidates below the support level at 49.70, short positions can be opened with the target at 47.00. Stop loss – 50.50. If the price reverses, the asset grows, and the price consolidates above 50.90, buy positions with the target of 53.20 will be relevant. Stop loss can be placed below the local low, at 50.00.
Crude Oil 1 Day Moving Averages – Strong Sell
Exponential Moving Average (5) 51.59 Sell
Simple Moving Average (5) 51.65 Sell
Exponential Moving Average (10) 53.07 Sell
Simple Moving Average (10) 53.09 Sell
Exponential Moving Average (20) 55.11 Sell
Simple Moving Average (20) 55.90 Sell
Exponential Moving Average (30) 56.16 Sell
Simple Moving Average (30) 57.85 Sell
Exponential Moving Average (50) 56.93 Sell
Simple Moving Average (50) 58.20 Sell
Exponential Moving Average (100) 57.13 Sell
Simple Moving Average (100) 56.97 Sell
Exponential Moving Average (200) 57.37 Sell
Simple Moving Average (200) 57.03 Sell
Ichimoku Cloud Base Line (9, 26, 52, 26) 57.63 Neutral
Volume Weighted Moving Average (20) 55.62 Sell
Hull Moving Average (9) 50.25 Buy
Currency Markets Today
At the opening of trading this week, the EUR/USD pair was actively declining, partially offsetting a steady growth at the end of last week. The development of the “bearish” dynamics was due to the strengthening of the US currency across the entire spectrum of the market, while the macroeconomic background provided little support to the euro. Thus, EU Markit Manufacturing PMI for January rose from 47.8 to 47.9 points with a neutral forecast. However, US PMI statistics were even better. US Markit Manufacturing PMI for January rose from 51.7 to 51.9 points with a constant forecast. ISM Manufacturing PMI for January rose from 47.8 to 50.9 points, breaking the level of 50.
Today, during the Asian session, the GBP/USD pair is growing slightly, trying to recover from a sharp decline the day before. Now, the instrument has added 0.12% and is trying to consolidate above the psychological level of 1.3000. The pound fell sharply amid growing concerns about the upcoming EU-UK trade deal. Brexit has only ended, and Boris Johnson had already threatened to abandon any EU conditions and evade trade negotiations, which should determine the UK access parameters to the European market. The market did not react to macroeconomic statistics published on Monday. Manufacturing PMI for January rose from 49.8 to 50.0 points with a constant forecast.
Today, during the Asian session, the AUD/USD pair is growing steadily, retreating from the lows since October 2019. Now, the instrument has added about 0.5%, testing the level of 0.6725 for a breakout. The growth of the instrument is facilitated by the results of the RBA meeting, where, as expected, the rate was left at 0.75%. In addition, the price is supported by technical factors and a sharp collapse in the Chinese stock market, which is prone to panic amid the spread of coronavirus. Yesterday’s macroeconomic statistics from Australia were ambiguous. ANZ Job Advertisements for January increased by 3.8% after a decrease of 5.7% last month. At the same time, Building Approvals for December fell by 0.2% MoM after an increase of 10.9% MoM last month. Analysts had expected a decrease of 3% MoM.
Today, during the Asian session, the USD/JPY pair is growing moderately, continuing to develop the “bullish” momentum formed yesterday. A severe collapse in Chinese stock markets is supporting the dollar, while further instrument growth is limited by rising tensions over the spread of coronavirus. The position of the American currency was also supported by strong US macroeconomic statistics on business activity. So, ISM Manufacturing PMI for January rose from 47.8 to 50.9 points against the forecast of 48.5 points. The Japanese Manufacturing PMI from Jibun Bank for January fell from 49.3 to 48.8 points with a neutral forecast.
Today, during the Asian session, gold prices are falling slightly, continuing to develop a “bearish” trend formed yesterday. At the beginning of the week, the weakening of the instrument was due to the steady strengthening of the American currency against the background of a sharp collapse of Chinese stock markets. In addition, the market is showing an increase in demand for risky assets due to the support measures provided by the Central Bank of China to its economy. The regulator lowered interest rates and filled the markets with additional liquidity, trying to minimize the damage from trade restrictions and partially closed state borders.
Tom, aka T Rex, is seasoned financial pro that cut his teeth on the Chicago trading oil futures in 1995. He has bachelor’s degree in finance and management. In less than 3 years he bought his own seat and set up shop on the exchange. For the next 10 years Rex traded his own account and some institutional accounts. In 2017, he decided to move to Florida and focus on educating traders and writing for financial websites.