Oil is actively recovering after a meeting of the U.S. Federal Reserve System (Fed). The regulator decided to raise the rate by a quarter of a percentage point despite concerns about inflation and tensions in the labor market. However, he had to reject the 50 basis points increase.
The regulator's words were aimed to ease monetary policy. The dollar index, as well as U.S. bond yields, are going down. This has a positive effect on commodity prices.
As of today, the cycle of rate increases is nearing its end. However, the Fed is likely to take additional measures to tighten its policy. Changes in the banking sector can lead to the introduction of more strict conditions for lending, which will be one of the tools of the regulator to reduce inflation in the country.
At the same time, the regulator still maintains a "dovish" position. The regulator stated that it is ready to continue increasing liquidity, in case of new bank shocks.
Also, optimism in the oil market comes from one of the largest consumers of oil.
According to the Reserve Bank of India (RBI), economic development in the Asian country is growing. The COVID-19 epidemic has had less impact on India's economic development than previously expected. Experts predict that the country's growth rate, achieved in 2022-2023, will remain at the same level.
India is the third largest consumer of oil in the world. The stability of its economy and maintaining growth rates will have a positive impact on demand for black gold during a potential economic downturn.
By technical analysis, oil overcame and tested the main resistance from the top to the bottom. Now new targets for growth are opening up. In the morning, oil removed the overbought RSI on the 1-hour timeframe, while the price had minimal volatility. Now a new wave of growth is possible, and it can start even without new drivers for growth.
The level of $78.5 may be the target, this price was already significant for oil a week ago. Stop-loss can be set at the return to the flat and just below the support level on the hourly timeframe. This corresponds to a price of $74.5.
Growth of Brent crude oil:
Take profit – 78.5
Stop-loss – 74.5
This content is for informational purposes only and is not intended to be investing advice.