Macro: Sandcastle economics
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Brent Crude oil (LCOH2)– Technical outlook for 2022
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: In the final quarter of 2021 Brent crude oil went through a correction phase before rallying strongly ahead of the year end and into the first days of 2022, thereby fast approaching its strong resistance at $86.75 per barrel. This is a level that represents the peaks from October 2021 and October 2018, and a break above is likely to pave the way towards the next strong area of resistance between $107 and $115 per barrel. The underlying trend is up, as illustrated by 21, 55 and 200 Simple Moving Averages all rising. In addition, a Relative Strength Indicator (RSI) above 60 is also supporting this uptrend.
For this longer-term bullish scenario to be reversed, another rejection at the $86.75 per barrel level of resistance could result in a move below the longer-term falling trend line, followed by a drop below the December 2021 low of $65.72 per barrel.
Carbon (CFIZ2). After a good run in November carbon got hit by a quick 20 percent correction in December, only to resume its uptrend during the dying days of 2021. If carbon breaks above the November 2021 peak of €90.75 per ton we could very well see it reach €102–108 during the first quarter of 2022.
For carbon to demolish both the short-term and medium-term bullish picture, a daily close below the December low of around €73 is needed. There are a few warning signs, however, of a weakening of the uptrend. On the weekly time period there has been divergence since the mid-December peak and more pronounced divergence recently illustrated by the RSI, where higher weekly closing prices have not been supported by RSI strength. In fact, the RSI has fallen while carbon prices have rallied—a divergence that could indicate an imbalance in the market. However, the medium-term uptrend will remain intact as long as carbon prices stay above the mentioned support at around €73.
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