Oil price volatility increased yesterday after Fed head Jerome Powell's statements. The target of yesterday's forecast was met, after which oil moved to active growth.
Federal Reserve System Chairman Jerome Powell said on Tuesday that the "deflationary process" in the U.S. economy has begun. However, an additional rate hike will probably be needed to bring inflation back to the 2% target. Powell's comments do not assume that Friday's strong employment report will change the central bank's focus toward future rate hikes.
Powell's statement can be interpreted as follows. Inflation is going down and that's good for risky assets. However, a strong labor market and lower inflation give reason to hold rates high for longer periods of time and that's not good for risky assets, which are putting Fed policy easing in their estimations.
Despite the controversial statement of the head of the Fed, risky assets began to rise. At the same time, downside risks are still relevant against the background of a tightening of U.S. monetary policy.
Turkey restarted crude oil deliveries to the Mediterranean export terminal in Ceyhan later in the evening. According to Bloomberg data, in January, Ceyhan exported more than 1 million barrels per day, or 1% of the world's supply.
Turkey quite quickly restarted oil supplies, which had been stopped after this week's earthquakes. Significant volume of oil returned to the market, which may put temporary pressure on the quotations.
According to the technical analysis, oil was able to break the uptrend and reach the first growth targets due to the impulse. On the background of the return of Turkish oil to the market, the price may be under pressure and it may pull back from its local highs.
The downside target will be the 0.5 level of the Fibonacci, which corresponds to the price of $82.0. There is also support in the form of pro-trading in the first days of February. Stop-loss can be set at the oil growth to 0.236 Fibonacci, this level has already been tested several times in the previous weeks. Thus, we will set the stop loss around the price of $85.7.
Decline of Brent crude oil:
Take profit – $82.0
Stop-loss – $85.7
This content is for informational purposes only and is not intended to be investing advice.