Oil is getting cheaper amid concerns about the economic consequences of a potential increase in U.S. Federal Reserve interest rates, as well as weak data from China.
This Wednesday, the Federal Reserve System (Fed) is preparing to raise its benchmark interest rate for the tenth time. This is expected to be the latest step in its year-long effort to control inflation at its fastest rate in the past four decades.
Wall Street traders are more interested in what Chairman Jerome Powell will say at the press conference about the regulator's future plans.
Investors are making different assumptions about Powell's speech. One of them is that the Fed will finally stop raising rates. According to other suggestions, the pause will be announced in case the inflation rate remains stable above 2%.
On the other hand, the unexpected decline in China's manufacturing PMI shows the unequal nature of the country's economic recovery.
This instability could affect imports. The business activity index decreased from 51.9 to 49.2, dropping below the level of 50 for the first time since December. It was also below market expectations of 51.4.
Consumption of gasoline and jet fuel, as well as coal, contributes to spending on basic goods. This is obvious from the relatively high rates of energy imports in recent months. In the first quarter, purchases of crude oil increased by 6.7% in comparison with the same period of the last year.
An unexpected decline in China's business activity index potentially could lead to a decrease in demand for Brent crude oil due to the country's influence on the global market. This in turn will put pressure on the price of oil.
The price of Brent is in the fifth downward wave formation on the H4 timeframe. The previous impulse formed support at 77.50 level, where the fifth wave has prospects to break it.
Signal:
The short-term prospects for Brent are to sell.
The target is at the level of 75.90.
Part of the profit should be fixed near the level of 77.50.
The stop-loss is at the level of 81.60.
"Bearish" trend has a short-term character, so the volume of trade should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
