USOil – Weak Dollar, Oil Tests Key Resistance
Oil prices rose to a new four week high at 70.39 yesterday as the US Dollar fell to a four week low. The USDIndex made a low at 92.13 this morning after the weekly unemployment claims report was the lowest since the start of the pandemic, at 340,000.
This week, OPEC, led by Russia, agreed to maintain production capacity of 400,000 barrels per day for October (continued from September) as due to the impact of Covid-19, there are still some factors of economic uncertainty, though we are starting to see strong fundamentals and renewed demand. The OECD’s crude stockpiles continue to decline, while US crude inventories (EIA) reported a lower-than-expected -7.2 million barrels this week, compared with a forecast of -2.5 million barrels.
From the technical point of view, yesterday’s rally in oil prices broke above the MA50 line, before slumping back to trade lower, now stuck at a key resistance zone consisting of the 70.00 psychological level, the MA50 line and the top frame of the Channel. If it is able to breach this level, the next resistance level is at 74.00 and then the multi-year high of 76.36, while on the downside support is at 66.00 and the support of the MA200 Zone 62.00. Overall the price is not clear at the moment because the MACD is moving up near the 0 line, while the RSI continues to hover near the 50 level.
Things to keep an eye on for today include the US Non-Farm Employment Report, as well as other labor data. This is seen as important information for the Fed’s decision on the tapering path for QE.
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