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26 Jul 2023

WTI Price Analysis: WTI retreats towards $79.00 ahead of Fed decision

  • WTI found support at a daily low of $78.66 and then recovered above $79.00 still holding daily losses.
  • FOMC decision will be the session’s highlight, expected to deliver a 25 bps hike.
  • EIA Crude Oil stocks fell in the third week of July by 0.6M, lower than expected.

The West Texas Intermediate (WTI) barrel trades soft on Wednesday as markets await the Federal Reserve (Fed) decision. In addition, the Energy Information Administration (EIA) reported a lower-than-expected decline in inventories in the week ending on July 21 and seem to be weighting in Oil prices.

On the other hand, the USD as per the DXY Index is declining, and US Treasury yields are decreasing ahead of the Federal Reserve's (Fed) announcement later in the session. Markets have already priced in a 25 basis point (bps) increase but are placing bets on a low likelihood of a similar increase in September (20%) and November (45%), respectively. Investors will need to model their expectations for the upcoming meetings based on the messaging regarding forward guidance since there won't be an updated macro forecast or dot plot. Its worth noticing that higher rates tend to cool down economic activity to the bets to be done on the Federal Reserve following the decision may affect the WTI price dynamics.

On a positive note, the announcement on Tuesday of the Chinese economy to step up an economic stimulus to bolster the local economic activity could provide support to the WTI as China is the largest oil importer in the world, so a stronger economic activity would imply a greater oil demand.

WTI Levels to watch

The daily chart of the WTI suggest a neutral to bullish outlook for the short term as buyers seem to be losing steam.  The Relative Strength Index (RSI) has a neutral slope near the overbought threshold, while the Moving Average Convergence Divergence (MACD) printed a lower green, implying that the bulls are losing steam.

Resistance levels: $80.00,$81.00,$82.60.
Support levels: $76.70 (200-day SMA), $74.59 (20-day SMA),$73.50 (100-day SMA).

 

WTI Daily chart

 


 

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