WTI Crude Oil Extended Previous Day Gains – is it Going After 40.36?

Posted Friday, June 19, 2020 by
Arslan Butt • 2 min read

WTI crude oil prices succeeded in extending the previous day’s gains and rose to the high level around 39.45 while representing a 0.83% increase on the day due to the risk-on market sentiment triggered by the signs of further stimulus from the US and upbeat comments by Japanese policymakers. The increase in crude oil prices was further bolstered by the reports that OPEC producers and allies agreed to meet their supply cut commitments. Moreover, two major oil traders said that demand is recovering well, which also exerted some positive impact on oil prices. As of writing, WTI crude oil prices are currently trading at 39.31 and consolidating in the range between 38.77 and 39.48.

Moreover, the reason for the risk-on market sentiment could also be attributed to the weekly jobless claims report, which showed an improvement as compared to the previous week’s figures. However, the minor declines were backed by the pace of reopenings across the US, which suggested further economic recovery that boosted risk-on market sentiment and urged investors into riskier assets rather than safe havens.

Weekly first-time unemployment claims dropped by 58,000 to 1.508 million in the week ended June 13. At the US-China front, the United States and China recently showed a willingness to continue talking on the trade deal despite having political differences, which initially exerted some positive impact on the risk sentiment.

Despite the increasing coronavirus cases in China and some US states, the risk sentiment did not give any significant heed to it. In the meantime, Sino-American tensions and geopolitical tussle among various Asian nations turned out to be among major factors that cap the ongoing optimism.

At the USD front, the broad-based US dollar is ending this week on a bearish tone while representing modest losses on the day, possibly due to marginal drop in US jobless claims, suggesting further economic recovery and pushing investors to withdraw their money from the safe-haven assets and to invest into risker assets.

Although, the losses in the US dollar also kept the oil prices higher as they both have an inverse relation. In the meantime, the intensifying coronavirus cases will keep a lid on any further losses in the US dollar. Whereas, the US Dollar Index that tracks the greenback against a basket of other currencies slipped 0.03% to 97.373 by 12:41 AM ET (5:41 AM GMT).

Whereas, the 10-year US Treasury yields extended their previous two-day losses near 0.70%, while stocks in Japan and China are moderately positive. The risk-on mood was further bolstered by the US stock futures, which are gaining below 0.20%.

The reason for crude oil gains could also be associated with the increasing doubt that Iran is up to preparing nuclear weapons and is denying an international investigation. On the other hand, OPEC+ members seem to not plan on extending the current production cut accord beyond August, but the market did not give any major heed to it. In the absence of any significant data/event, oil traders will keep their eyes on the geopolitical headlines and virus updates for fresh impetus. Also, the Baker Hughes US Rig Counts, prior 199, will likely offer extra information for decision making.

Daily Support and Resistance
S1 35.22
S2 36.69
S3 37.33
Pivot Point 38.16
R1 38.8
R2 39.63
R3 41.1

WTI crude oil is trading bullish, having violated the double top resistance level of 38.90 level. With this, crude oil has a further room for buying until 40.36 before we see selling trades in the crude oil. The MACD is also supporting the buying trend, along with the three white soldiers pattern that we can see in the WTI chart above. The idea is to take buying trades over 39.65 level until the resistance level of 40.35.

Good luck!

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