Selling Oil, As the FED Pushes Further Hikes on Growing Inflation

The overall trend in crude Oil remains bearish since the reversal in June and earlier this week the price of US WTI crude fell to $76 lows. We saw a reversal higher during the week as the USD retreated lower, which benefited most other trading assets.

Crude Oil 5-Minute Chart – Reversing Lower

The 50 SMA turned into resistance in Oil

US crude climbed up to $83, but it started reversing lower yesterday and today the bearish momentum is picking up pace despite OEPC lowering the output cut plans from around 1 million barrels per day (bpd) to 500k-1M bpd. This is negative for Oil prices, although the increasing PCE inflation figures for August, as well as comments from FED members that they will continue raising interest rates, have done most of the damage, as the USD starts to reverse higher. We decided to sell crude Oil at the 50 SMA (yellow) a while ago and booked profit as this moving average rejected the price and USS WTI fell around 100 pips lower.

US August Personal Consumption Expenditures (PCE) Report

• PCE core MoM +0.6% vs +0.5% expected
• Prior MoM +0.1%
• Core PCE YoY +4.9% vs +4.7% expected
• Prior core PCE YoY was 4.6%
• Headline PCE YoY +6.2% vs +6.3% prior (revised to +6.4%)
• Deflator MoM +0.3% vs -0.1% prior

Consumer spending and income for August:

• Personal income +0.3% vs +0.3% expected. Prior month +0.2%
• Personal spending +0.4% vs +0.2% prior
• Real personal spending +0.1% vs +0.2% expected. Prior month +0.1%

Another hot inflation report is not going to be taken well. That said, the hot August CPI report is what kicked off the latest round of risk aversion so high prices in August aren’t exactly a shock. US equities gave up modest gains after the report while the US dollar strengthened slightly.

Comments From the Fed Vice Chair Brainard

US WTI Crude Oil