Brent oil quotes spend the rest of the week in a corrective decline, having failed to break above the level of 87 on Monday. For oil, a negative sign is that the local high of the last wave of growth turned out to be lower than the previous one in January (when the price at some moments tried to climb above 89). This fact can give strength to the bears, which can increase their pressure on oil prices.
Yesterday, data on rising prices from American industrialists added to concerns after the negative statistics on consumer inflation published on Tuesday. Annual factory inflation in January showed a slowdown from 6.5% to 6%, but market participants expected even lower figures (5.4%). The rise in prices amounted to 0.7% (high since June) concerning December.
Seeing such statistics, several Fed officials started to talk about the possible return of growing interest rates in increments of 0.5% and not 0.25%, as it was at the last two meetings of the American regulator. This led to an even greater increase in the yield of US Treasury bonds and, as a result, pressure on all commodities, prices for which are denominated in US currency.
In addition to high inflation, a strong labor market helps to push higher dollar rates, with weekly jobless claims still holding below 200 thousand for five weeks in a row. Such statistics also play in favor of increased inflationary pressure and tighter monetary policy.
The Stochastic indicator continues to decline but is still far from the oversold zone, which means that the potential for a correction in oil prices hasn’t yet been exhausted. The next targets of the bears will be the levels of 83 and 82.5, upon reaching which it is reasonable to take profits, as the demand for oil at reduced prices may increase.
We may offer you the following option of trading strategy:
Sell Brent oil in the range of 84 - 84.5. Take profit 1 — 83. Take profit 2 — 82.5. Stop-loss — 85.5.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.
This content is for informational purposes only and is not intended to be investing advice.
