China's economy is rocketing. On the other hand OPEC+ countries take the decision to cut the production. What will be the impact on the oil price?
What awaits the Oil Market in February?
Information is not investment advice
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
However, the lingering question is "will the reopening of the Chinese economy pool enough demand to alter the decline in the outcome of oil price in February?"
How does this affect the Forex market?
Oil prices usually work as a leading indicator for the US dollar. Rising prices lead to inflation increase, which forces the Fed to become more hawkish. As a result, the greenback strengthens.
On the other hand, lower oil prices cool down inflation, making the Federal Reserve to act more dovish. As a result, the USD declines.
What do the charts have to say?
In light of the fundamental breakdown above, we will draw our conclusions from the outlook of price on the charts using price action.
On the daily timeframe, Brent has been steadily bearish since March, 2022, declining by over 33% from the high. At the present, price has created a downward channel and is currently retesting the trendine resistance. The presence of the 100-Day SMA at that level as a confluence simply makes a stronger case for a bearish continuation from that point.
On the daily timeframe, XTIUSD formed a rising channel inside a downward channel. The implication of this is that the point of intersection of trendlines from both channels acts as a strong area of resistance. Considering the presence of the 100-Day SMA as an added confluence, it is only logical to expect lower prices on oil over the next couple of days.
Based on the analyses above, it is safe to expect bearish price action of the oil market.
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Oil prices fell to a three-month low following the release of US inflation data which was in line with expectations…
The US dollar index has lost around 12% since October 2022 till its local low at the end of January 2023.
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