USD/JPY Breaches ‘Line in the Sand’ Ahead of BoJ Meeting

Crude Oil Prices, Charts, and Analysis

• US crude prices have fallen once again
• Worries that US interest rates could stay high into this year’s second half are weighing
• The remained of this week offers few trading cues

Crude Oil prices were lower again on Thursday with the market for the moment more focused on likely end demand in a world where interest rates don’t fall as quickly as many hoped at the start of the year.

United States Federal Reserve Chairman Jerome Powell this week cited a lack of inflation-fighting progress, triggering yet another push-back of the markets’ rate-cut expectations. Borrowing costs are now expected to stay at current levels at least until July. When 2024 got underway, they were tipped to have started falling in March.

The prospect of higher-for-longer interest rates will keep economic activity depressed, and, thereby, stifle energy demand, or so the market believes. Indeed, JP Morgan reportedly said on Tuesday that oil demand has been running substantially below its forecasts since the start of April.

Such gloom has overridden substantial geopolitical uncertainties stemming from conflict in Ukraine and the Middle East which might be expected to bolster prices. For now, the market appears to be discounting further escalation of military action between Israel and Iran even though the former has reserved the right to retaliate against recent drone and missile strikes. The US has also re-imposed oil sanctions on major producer Venezuela, making it broadly illegal for companies to deal with that country’s state-run oil company.

This week’s sessions don’t offer much in the way of likely trading cues, but we will hear from several Fed officials and get a snapshot of US oil-rig activity from oil service major Baker Hughes.

US Crude Oil Technical Analysis

The West Texas Intermediate benchmark has shed more than $5/barrel in the last five trading sessions having failed on two occasions this month to break through what looks like important resistance at the $87.63 retracement level.

Wednesday’s sharp fall took prices back below a trendline from mid-June 2022, which now once again offers resistance, this time at $82.66.

The market appears to be headed back to support at its 200-day moving average. That comes in at $79.75 and it will be instructive to see whether that survives, if tested. The market has been above that level since March 12. Should it give way, uptrend-channel support at $77.46 will probably come into play.

Battered bulls’ immediate priority will be to retake psychological resistance at the $83 handle before any attempt to negate Wednesday’s sharp fall from $85.44 can be made. Worryingly for them, WTI’s Relative Strength Index does not suggest that the market is in any sense oversold at this point.

IG’s own sentiment data finds traders quite bullish at current levels, but to such a great extent (72%) that a contrarian bearish play could well make sense.