Brent opened a new week with a slight growth of 0.5% at the end of Monday's trading. In fact, the price tested the level of 89 for the first time since December 1 in order to break it from the bottom upward. The first attempt proved to be unsuccessful, and the price has now rolled back to the 88 range. But the overall sentiment on the market suggests that there will be another Brent rally to 89 and then to the key point of 90.
While China, being the major newsmaker in recent weeks, continues to celebrate the Lunar New Year, let's focus on the news agenda from other countries and regions. When it comes to Europe and the U.S., more and more attention is being paid to next week's central bank meetings. The monetary tightening cycle is gradually coming to an end, which is also positive for oil prices.
As traders predict a further weakening of the dollar, they are betting on assets that are more profitable when the greenback depreciates. Oil might be subject to increased demand, since it will become cheaper for buyers holding other currencies as the dollar falls. Seeing this pattern, traders have expanded their investments in crude oil futures and options at the fastest rate in more than two years according to last week's results.
Data on 22% supply cuts from Russia, presented by Bloomberg, also supported a continued growth of oil prices. On the other hand, it should be noted that weekly data is highly volatile, so the average of at least 4 weeks is used to draw far-reaching conclusions. But it is quite a good basis for a speculative upside play.
There is rather steady growth of oil, therefore it is possible to avoid the overbought state on technical indicators. That is why no significant correction is needed for a new breakout into the range of 89 and 90.
The following trading strategy can be suggested:
Buy Brent at the current price. Take profit 1 - 89. Take profit 2 - 90. Stop loss - 86.6.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.