Crude Attempting to Recover

Crude prices are looking a little softer through the European morning session on Tuesday, but remain well up off last week’s lows. Crude futures are currently sitting just atop the 77.64 level; a key near-term pivot for the market. The rally comes despite a fresh uptick in USD recently on the back of last week’s bumper NFP reading. Rate cuts from the BOC and ECB last week helped bolster sentiment, with traders hopeful that the Fed will follow suit in September. Additionally, the start of the summer driving season in the US is also helping reinforce demand expectations, offsetting concerns over recent weakness in Chinese industrial data.

US Inflation in Focus

Looking ahead this week, the big focus will be on tomorrow’s US CPI report and June FOMC meeting.  While last week’s rate cuts in Canada and Europe were seen as increasing the likelihood of Fed easing in September, Friday’s NFP shock shows that headwinds still remain. If tomorrow’s data shows that inflation remains at or above recent levels last month, this will likely lead to a more hawkish tone from the Fed, diluting September easing chances and pushing USD higher, consequently dragging oil prices lower. However, if we see unexpected downside in tomorrow’s data and a more dovish tone from the Fed, pricing for a September cut should jump, leading USD lower and allowing oil room to push higher.

Technical Views

Crude

The rally off the 72.61 level in crude has seen the market breaking above the bear channel and now testing above the 77.64 level. With momentum studies turning higher, if price can hold above this level, the focus shifts to a test of the 82.59 level next. To the downside, 72.61 remains key support with 67.81 the deeper level to note. 

(Click on image to enlarge)

More By This Author: