Oil is stabilized around $83 amid the Fed rate decision and OPEC+ production cuts. For now, the oil price is getting rid of the overbought condition that had accumulated during the rally earlier this year.
The OPEC+ group at Wednesday's meeting endorsed the current policy of cutting oil production agreed to last year in hopes of boosting demand from China.
OPEC+ agreed to reduce production by 2 million barrels per day (bpd) — about 2% of global demand, from last November through the end of 2023. That step was taken to support the market.
The decision to maintain the current parameters of the OPEC+ deal was certainly expected.
The Fed announced its decision to raise the interest rate by 0.25%. The Fed promised to keep raising the cost of borrowing as part of the fight against high inflation. The dollar index fell on this decision. A weaker dollar makes oil and oil products in U.S. currency less expensive for foreign buyers, and that increases demand.
Generally, the Fed's rhetoric remained the same. The committee is ready to keep further rates high until the end of 2023. This is necessary to achieve 2% inflation. It was correctly assumed in past forecasts that the Fed would maintain a hawkish stance. However, the bulls in the market saw key phrases about inflation getting declined. As a result, risky assets rose and the regulator's hawkish stance went unchecked.
Oil lagged behind other risky assets yesterday, which rose after the comments from the head of the Fed. At the moment, oil continues to move in a large ascending channel and is near its lower boundary. A local downtrend was formed as part of the current correctional movement. Against the background of the growth of markets and the proximity of oil to the support levels, opened long positions looks more preferable.
The growth target will be the level of 0.236 Fibonacci, which corresponds to the price of $85.8. This level has often acted as support or resistance before. Stop-loss will be set at the exit from the uptrend near $80.5.
Brent crude oil growth:
Take profit – $85.8
Stop-loss – $80.5
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