Chapter 12 06/07 WTI: Focus on the Rebound in the Short Term and Falling in the Later Period of the Range Tradi
Abstract: WTI crude oil prices remained depressed in the range, and remained under pressure for the second consecutive day. API crude oil inventory unexpectedly decreased, and the market focused on the EIA inventory report to clarify the direction.
Fundamentals
The market is now focusing on the impact of the EIA inventory report for the week ending June 2, which is expected to decrease by 1.2 million barrels after an unexpected increase of 4.5 million barrels. A lower increase or an unexpected flat may mean more room for crude oil prices to rise.
Earlier today, the API report showed that private crude oil inventories decreased by 1.71 million barrels, which may be due to the increase in purchases before the Memorial Day holiday. The market had expected an increase of 1.5 million barrels this week.
In addition to inventory data, investors need to closely observe risk catalysts and economic growth signals to make clear the trend of crude oil prices.
Risk factors and a weaker USD could also add to crude oil price gains, although hopes of a Fed tightening this month are now supporting the USD after the May non-farm payrolls report showed that employment again exceeded expectations. Nonetheless, the pessimistic ISM Services PMI released earlier this week is limiting the USD's gains.
In May, the U.S. ISM PMI for non-manufacturing fell to 50.3 from 51.9 in April, the lowest level since this year. The business activity index recorded a decline for the fourth consecutive month, which, together with the reduction in orders, indicates that service providers are experiencing a sluggish demand. This is likely to continue to drag down oil prices.
Technical Analysis
WTI crude oil found support near the pre-trend line in its hourly time frame and may further expand the increase to USD$73.80. However, the technical indicators look mixed.
The 100 SMA is below the 200 SMA, indicating bearish pressure, but the gap between the indicators has narrowed, suggesting that prices could move further up in the near term. Moreover, crude oil prices are above the 10- and 20-day SMAs, so they could become dynamic support.
Short-term bulls could target the 38.2% Fibonacci retracement extension at US$73.80 or the 50% level at US$74.32; stronger bullish momentum could take prices to the 61.8% level or even US$75.26, near the swing high, or up to US$76.42.
However, the stochastics have moved down from the overbought zone, suggesting that selling pressure may be about to return. The RSI also appears to be moving south, although the oscillator still has some room to climb. It is recommended to go short at the highs.
Trading Recommendations
Trading direction: Short
Entry price: 73.80
Target price: 68.69
Stop loss: 76.07
Deadline: 2022-06-21 23:55:00
Support: 72.02, 71.09, 70.25
Resistance: 73.12, 73.80, 74.32
