Oil price outlook mired by failure to test 50-Day SMA
Oil Price Outlook
The price of oil bounced back from a fresh yearly low ($63.64) earlier this month to keep the Relative Strength Index (RSI) out of oversold territory, but crude appears to be reversing course ahead of the May high ($76.69) amid the failed attempt to test the 50-Day SMA ($75.14).
Oil price outlook mired by failure to test 50-Day SMA
The price of oil slips to a fresh weekly low ($70.140) as it carves a series of lower highs and lows, and crude may continue to reflect a bearish price series over the coming days as it appears to be tracking the negative slope in the moving average.
Looking ahead, data prints coming out of China, the world’s second-largest consumer of oil, may influence crude prices as Retail Sales are projected to increase 20.1% in April, while Industrial Production is expected to rise 10.1% during the same period.
The developments may curb the recent decline in the price of oil as it casts an improved outlook for global growth, and it remains to be seen if the Organization of the Petroleum Exporting Countries (OPEC) will adjust the production schedule over the coming months as the most recent Monthly Oil Market Report (MOMR) reveals that ‘for 2023, the forecast for world oil demand growth remains broadly unchanged at 2.3 mb/d.’
Source: OPEC
In turn, the MOMR goes onto say that ‘total world oil demand is anticipated to reach 101.9 mb/d in 2023,’ and expectations for sticky demand may encourage OPEC and its allies to retain the current production schedule at the next Joint Ministerial Monitoring Committee (JMMC) meeting on June 4 especially if the data prints coming out of China instill an improved outlook for global growth.
With that said, positive developments coming out of China may curb the recent decline in the price of oil as the region retracts the COVID-19 restrictions, but crude may struggle to retain the rebound from the yearly low ($63.64) as it carves a series of lower highs and lows following the failed attempt to test the 50-Day SMA ($75.14).
Oil Price Chart – WTI Daily
Chart Prepared by David Song, Strategist; Oil Price on TradingView
- The price of oil appears to be reversing ahead of the monthly high ($76.69) amid the failed attempt to test the 50-Day SMA ($75.14), and crude may track the negative slope in the moving average as it struggles to retain the rebound from the yearly low ($63.64).
- The recent series of lower highs and lows may push the price of oil towards $69.10 (23.6% Fibonacci extension), with a break below the yearly low ($63.64) bringing $62.80 (61.8% Fibonacci retracement) back on the radar.
- Nevertheless, failure to break/close below $69.10 (23.6% Fibonacci extension) may curb the bearish price series, with a move above $71.50 (38.2% Fibonacci extension) opening up the $72.90 (78.6% Fibonacci retracement) to $73.20 (38.2% Fibonacci extension) area.
- Will keep a close eye on the Relative Strength Index (RSI) as the recent weakness in the price of oil pushes the oscillator back towards oversold territory, but another failed attempt to push below 30 may accompany a rebound in crude prices like the price action from earlier this month.
Additional Resources:
USD/CAD recovery materializes amid failure to test April low
EUR/USD outlook clouded by downward trend in RSI
--- Written by David Song, Strategist
Follow me on Twitter at @DavidJSong
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.
GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024