Today's main event—and the biggest wildcard for Brent crude—is how the market will react to the Federal Reserve's (Fed) latest policy verdict.
Against this backdrop, traders are walking on eggshells as they brace for the interest rate announcement, anxiously scanning for any clues about the regulator's next move.
Right now, the main risk factor is the wrap-up of the central bank's two-day policy meeting. The rate decision itself, along with the first press conference from the new Chairman, Kevin Warsh, is set to send shockwaves through the commodities market.
Here's the scenario to watch. If the updated dot plot signals that the Fed is in no hurry to ease monetary conditions and is willing to keep borrowing costs higher for longer, the dollar index (DXY) could catch a strong bid. Since Brent is priced in the American currency, a stronger greenback would hurt foreign buyers and likely trigger a new wave of selling.
On the flip side, if Warsh strikes a dovish tone, oil could get a powerful shot in the arm and make a run at the upper end of its current trading range.
Coming in a close second in terms of weight is today's weekly Energy Information Administration (EIA) inventory report. A seasonal uptick in refining activity and a potential build in US crude stocks may create some short-term challenges for investors.
Adding to the unease, disappointing May retail sales figures out of the US have poured cold water on hopes of robust fuel demand, stoking recession fears in the world's biggest oil consumer and taking the wind out of speculative sails.
Meanwhile, expectations that the Strait of Hormuz could soon be cleared and additional Iranian barrels would re‑enter global markets are chipping away at Brent's support, prompting speculators to cash out.
Turning to the charts, oil is currently creeping toward the $72.50 zone, where a rebound may be imminent. But keep in mind—the $87.30 breakout target is still very much in play.
The ultimate recommendation is to buy Brent crude from $72.50. Lock in profits at $87.30. Place Stop Loss at $65.00.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow you to enter a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
