After the 0.5% rate hike Fed made it clear that the slowing of growth doesn't mean the fight against inflation. According to several forecasts, the borrowing costs will significantly grow much bigger than previously suspected.
In such a way, the Fed predicts a rate hike of up to 5.1% by the end of next year. Officials say that the level of the rate will remain high for a long time. However, despite the forecasts, investors hope that the rate will increase next year.
Investors didn’t believe in the Fed's forecast, however, it is very important. Keeping the rate high for a long time will lead to a deep recession, and it will harm the future assessment of oil demand. Investors may reconsider the words of the Fed during the near trading session, and a decrease in oil prices will occur.
It is currently reported that amid the large supplies of the US Strategic Petroleum Reserve and the decrease in the activity of oil refineries, the US oil reserves increased by 10.2 million barrels. This is the highest rate since March 2021. High reserves hurt oil prices.
China faces difficulties.
The sudden cancellation of the long-held zero-COVID strategy made the economic prospects quite uncertain because the factories prepared for malfunction and the lack of labor force growth. The high-frequency data has already indicated the further slowing activity in Beijing and other cities this month as the infection spreads widely.
“November data was far below the consensus, and this shows the increasing slowdown that will remain this month”, said Lu Ting, a Chief China Economist at Nomura Holdings Inc.
The main oil consumer still has economic problems because China wasn’t ready for the sudden opening of the economy, and this harms the oil demand too.
Technical analysis points to oil’s reversal.
Prices approached the upper border of the downtrend whose breakthrough will cancel the further decrease. That's why you can place stop-loss behind this resistance at the level of $84.
This decrease is aimed at the lows reached several days before. These reversal candlesticks have very long shadows, so we place the goal at the trade level of the candlestick’s bodies. This level is about $77.
Decrease in Brent oil:
Take profit — $77
Stop-loss — $84
This content is for informational purposes only and is not intended to be investing advice.
