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Abstract: During the trading session on Tuesday, WTI crude oil continued its recent difficult upward trend and successfully stood on the 100-day SMA (which was the key resistance level in the past few months). However, at present, there is still a little upside from the early supply zone of US$75.50; If the bulls turn down again at this level, it means that the recent competition between bulls and bears is the best balance.

Fundamentals

With China hinting that it will provide further capital injection for its troubled real estate industry, oil prices have stabilized and rebounded in the past few trading days, boosting the energy demand prospects of the world's largest crude oil importer.

The slow recovery of China's economy from COVID-19, the tightening of monetary policy by central banks, and the increased liquidity of crude oil in producing countries such as Russia and Iran are important obstacles to the upward trend of crude oil prices this year. However, from the perspective of risk preference, China's measures are important, but not enough to promote, and more measures are needed.

However, the oil price will go up in the short term due to the suppression of speculative sentiment, but it will be further strengthened under the support of fundamentals, and the marginal improvement may boost the valuation of crude oil prices.

After OPEC's multiple rounds of substantial production cuts, the probability of a staged gap in crude oil supply in the third quarter is still large. Considering the potential recovery of demand, oil prices may rise in July and August. However, there are still differences in the medium and long-term trends of oil prices in the market. Based on the downward pressure on the macro level, in the medium and long term, the center of gravity of oil prices also has a downward probability.

In the rest of this week's data, crude oil traders expect EIA to report a significant decrease of 1.1 million barrels in inventory. Compared with the previous reduction of 1.5 million barrels, the decline is slightly smaller, indicating a slowdown in demand. Nevertheless, a large decline may indicate that demand is still strongly supported, which may push up the price of crude oil.

Before this, the U.S. will announce the consumer price index CPI in June, which may affect the Fed's tightening policy later this month. Weak inflation data may weaken the hope of raising interest rates by 25 basis points, which may continue to push down the USD, thus bringing upward space for crude oil and other commodities.

On the other hand, strong consumer price index data may indicate that austerity measures will be taken again later this month, which will benefit the USD and be negative for risky assets. After all, rising borrowing costs may further curb business and consumer activities, thus curbing the rise in commodity prices such as crude oil.

Technical Analysis

WTI crude oil accelerated upward after breaking through the top level of its interval resistance of US$73.75, indicating that a rebound with the same height as the rectangular shape is developing.

The rectangular range is about US$67.20-73.75. 100 SMA also broke above 200 SMA, indicating that bulls are taking over and may keep rising. At the same time, the price is higher than the two SMAs, so these SMAs may be used as dynamic support for bargain hunting.

However, stochastic indicators have been showing overbought conditions for quite a long time, so the decline may mean that the recent competition between the bulls and bears has been best balanced. If this happens, crude oil may fall back to the middle of the shock range.

The RSI is also in the overbought zone, reflecting that the bulls are starting to show fatigue. A decline could signal a rise in selling pressure, so crude oil prices could follow.

Overall, with the bulls stabilizing the 100-day SMA, crude oil prices may continue to move higher later in the day as long as the closing price continues to be above the SMA. It is recommended to buy the dips.

Trading Recommendations

Trading direction: Long

Entry price: 75.50

Target price: 79.50

Stop loss: 72.15

Deadline: 2023-07-26 23:55:00

Support: 74.60, 74.11, 72.67

Resistance: 75.50, 76.11, 76.98