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Oil is Under Pressure

2/6/2023 1:10 PM

Brent Crude Oil quotes continued their downward trend with a target at 76.00 as a result of the US Fed's interest rate increase by 25 basis points to 4.75%. The head of the department Jerome Powell noted that the disinflationary process in the economy has begun, but additional evidence will be needed to be sure that the situation is under control, and for now it is premature to talk about victory over the rise in consumer prices.

Last Friday, strong data on the US labor market were released, which will allow the regulator's officials to continue the "hawkish" course of monetary policy: the number of new jobs created in the non-agricultural sector exceeded the forecast by more than 2.5 times and amounted to 517.0K, and the dynamics of average hourly wages slowed from 0.4% to 0.3%. Against this background, the US currency strengthened, and alternative assets went into correction.

In general, the fundamental background for oil remains positive: investors hope for the recovery of the Chinese economy after the lifting of quarantine restrictions, which may lead to an increase in global gross domestic product (GDP) and energy demand. This is confirmed by the rhetoric of the head of the International Energy Agency (IEA) Fatih Birol, who believes that half of the growth in global demand for "black gold" this year will fall on China, which is the world's largest importer and where the sale of jet fuel has already increased dramatically with the opening of borders.

The long-term trend remains downward. The price is moving towards the target at the support level of 76.00, in the area of which it will be possible to assume the fixation of sales by large market participants. If this mark is held, an upward correction will begin with a possible target at 88.95, and if it is broken down, the fall will continue with a target at 69.70.

Last week, the mid–term trend changed to a downward one as a result of the breakdown of the target zone 82.34-81.67. Now the target of the new trend is to reach the target zone 2 (75.64–74.97). The trend boundary is shifting to the levels of 86.97–86.30 and if the price corrects to this area, it will be possible to consider sell positions with the first target at last week's low at 79.68.

Resistance levels: 88.95, 99.50. | Support levels: 76.00, 69.70.

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