Falling Chinese inflation, upbeat signals on U.S. jobs and tax hike proposals for the U.S. wealthy all challenge oil bulls

2023-03-09 17:38:31

Earlier Thursday, WTI crude oil rose for the first time in three sessions, hovering around an intraday high of $76.85. In the process, crude oil cheered a broad pullback in the dollar and upbeat oil inventory data. However, falling inflation in China and concerns over hawkish monetary policy have spurred oil buyers, with the commodity trading around $76.30 a barrel.

The U.S. dollar index (DXY) snapped a two-day uptrend while retreating from its highest level since Dec. 01, 2022, down 0.13% intraday at press time, near 105.55, as the market weighed on mixed U.S. statistics. Get ready for Friday's key non-farm payrolls data.

On Wednesday, US February ADP Employment Change rose to 242K, against consensus forecast of 200K, and previous reading of 119K (revised).

Also, the U.S. goods and services trade balance fell to $68.3 billion from $67.2 billion previously (revised) and analysts' estimate of $68.9 billion. It is worth noting that the JOLTS job vacancies in the United States improved to 10.824 million in January, compared with the expected 10.6 million, but slowed down from the previous value of 1.124 million.

It should be noted that the U.S. Energy Information Administrations (EIA) official WTI crude stockpiles data coincided with the American Petroleum Institutes (API) industry stockpiles report, while inventories fell in the week ended March 3.

Elsewhere, disappointing inflation data from China also dampened prospects for a recovery in the world's second-largest economy and weighed on risk conditions. At the same time, there may be concerns about higher taxes in the world's largest economy in the United States, and the political chaos associated with it, as U.S. President Joe Biden proposed raising corporate taxes from 21% to 28% in his latest budget guidelines released on Friday.

In this case, S&P 500 futures struggled to find a clear direction after bouncing off a one-week low the previous day. Elsewhere, U.S. 10-year Treasury yields rose to 3.99%, up 1 basis point, while two-year yields pared intraday losses around 5.05%.

The inverted U.S. yield curve widened to its highest level since 1981 and fueled recession fears on Wednesday. However, there were no surprises in Fed Chair Jerome Powell's testimony 2.0 and mixed US data, which seemed to trigger the latest pullback in the greenback.

Next, a light calendar could allow WTI to trim some of its weekly gains ahead of Friday's important U.S. non-farm payrolls data.

The latest trading data of CME crude oil futures

Taking into account preliminary data provided by the CME Group for crude oil futures markets, open interest rose for a second straight session on Wednesday, rising by about 5,500 contracts on the day. Volume, on the other hand, maintained erratic activity, shedding more than 144,000 contracts.

On Wednesday, WTI prices extended their weekly losses. The decline coincided with an increase in open interest, allowing the selling pressure to continue. That said, initial support now lies at the weekly lows (February 22 and 23) around $73.80.


WTI Oil Price Technical Analysis

Oil prices fell below the middle track of the Bollinger Band, and an upward support line in early February was around $75.15, posing a challenge to commodity bears.

In the short term, continue to pay attention to the support near last Friday's low of $75.84 and the February 27 low of $74.97.

Next, it may further test the support level around $73.56 under the Bollinger Band.

The upper Bollinger Band middle rail resistance is currently around $77.18.

The 5-day moving average resistance is around $78.12.

The 100-day moving average resistance is currently around $79.60. If this position can be regained, it will weaken the short-term bearish signal.

The stronger resistance is around $80.74 on the Bollinger line. If it can break through this resistance strongly, it will increase the bullish signal in the market outlook.

Unless the oil price breaks through $81.00, the rebound of WTI crude oil is still difficult to achieve.


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