Technical Analyst, Saxo Bank
Both WTI and Brent Crude oil have been on fire lately. If you want background for this read Ole Hansen’s exceptional piece here.
Technically we can see how both have been trading in a rising trend since February. Brent Crude in a narrow rising channel whereas WTI seems to have formed a rising wedge pattern.
RSI is showing divergence for both too, indicating a correction could be close and with the candles made in the past week in Brent Crude, a top seem to be in place. Brent got rejected at $80.50/b twice first by a Gravestone-like Doji and then again yesterday with another Doji, both with long shadows on the upper side, indicating buyers are struggling to push the price higher. If we get a negative candle today Brent is likely to initiate the correction which could take it down to around $75/b. The bullish picture, however, will still be intact as long as Brent stays above $72.40/b.
Keep an eye on the lower rising trend line on RSI it's very close to break.
Chart source: Saxo Bank
WTI has formed what looks like a rising wedge formation currently testing the lower rising trend line with identical technical indicators ie. RSI divergence and close to breaking a rising trend line. No top and reversal candle is in place but the uptrend does seem a bit stretched in the short term.
A break of the lower trend line should take WTI down to around $67.50/b level. However, the overall uptrend is still intact as long as WTI doesn't close below its May low at $66.85/b.
Chart source: Saxo Bank
Bigger picture – Brent
Brent crude oil has recovered significantly since its trough in 2016 just below around $27/b for WTI to now in the high 70s but there could very well be more upside after an expected correction as mentioned above. A long-term falling trend line going back to the all-time high in 2008 with some resistance around $88.50/b in Brent could test the $90/b level, maybe even trying to push for $100/b if it succeeds in pushing above the long-term falling trend line.
Chart source: Saxo Bank
Bigger picture – WTI
WTI oil has also (of course) recovered significantly since its trough in 2016 at $26/b to now trading in the 70s. However, after an expected correction as previously mentioned there could very well be more upside. The long-term falling trend line going back to the all- time high in 2008 with some resistance around $75-76/b. WTI could test the $80/b with in next few weeks ie. before the driving season kicks in, which is historically a bit weak for oil ie. oil should show strength until end-June then weaken.
Chart source: Saxo Bank
From the below graphs (courtesy of Updata Analytics which we can soon offer to Saxo clients) you can see 20 years of the weighted average of annual seasonality for the past 10 years. WTI usually tops out around June.
Seasonal chart. Source: Updata Analytics
2024: The wasted year
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Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
