Stagnation
Today’s Spotlight Market
Crude Oil prices are have been hanging around north of the $40 mark, bolstered by a weaker Dollar.? The greenback has given back some of its gains in recent sessions due to the dovish policy statement from the Federal Reserve, as well as technical selling.? Some traders were discouraged by the inability of the US Dollar Index to firmly break out above the 100.00 mark, which has triggered some profit taking.? Nothing has fundamentally changed for either Crude Oil or the greenback, so traders may take the recent strength of Crude Oil and weakness in the US Dollar with a grain of salt.? The shift in the timetable for interest rate hikes from the Fed does not take away from the fact that Europe will, in all likelihood, still be in an easing cycle when the US central bank does raise rates.
Fundamentals
Last week?s large jump in Crude Oil inventories surprised no one, as production continues to increase.? Inventory levels in Cushing, Oklahoma have increased for 15 consecutive weeks, reaching a record 54.4 million barrels on March 13.? Traders are beginning to wonder if Cushing has the potential to reach its full capacity of 70.8 million barrels.? Cushing is not only the delivery point for the NYMEX (CME Group), but also a key hub for Oil going to refineries along the Gulf of Mexico.? It also represents 60% of storage capacity in the Midwest and 19% of all commercial Crude Oil storage in the US.? China has done little to help instill confidence in Crude Oil bulls.? The HSBC/Markit Purchasing Managers? Index fell to 49.2 in March, which is below the 50.0 dividing line between growth and contraction.? This is a 11-month low for the indicator.? Investors are concerned that China may be behind pace for its target 7% annual GDP growth rate in the first quarter, which may have negative implications for the labor market.? A downtick in Chinese manufacturing could be a sign of weaker than expected demand from China.? In the short-term, Crude Oil may continue to fluctuate? based on currency movements.? However, the fundamentals are difficult for traders to discount.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the May Crude Oil contract trading above near-term support around the $44 mark.? Price briefly dipped below this support level before recovering.? The RSI indicator remains near oversold levels, which could be seen as positive in the near-term.? Prices have traded up to the 20- and 50-day simple moving averages without crossing the averages.? A move above the 20-day moving average could be seen as possibly forming a near-term low.
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