China Data Weighs on Oil Prices
2023.08.09 03:31
- Chinese trade data disappoints again
- Saudi and Russian cuts continue to support prices
- Divergence a potential red flag
The data from China appears to be weighing on oil prices today, which is understandable with it being the world’s second-largest economy.
Still, oil remains not far from yesterday’s highs, having recovered more than 20% since late June.
Clearly, the cuts from Saudi Arabia and Russia are working, on top of all of those implemented by OPEC+ since late last year.
The market now looks much tighter and the economic outlook is potentially a little brighter too, with central banks either at or very close to the end of their tightening cycles.
Is the oil rally running on fumes?
We saw plenty of support between March and June around $70-$72 but the price has since rallied strongly, breaking through the descending channel and, more recently, the 200/233-day simple moving average band.
Daily Chart:
Source – OANDA on Trading View
That’s taken it back into bullish territory, in theory, and today it’s testing that as support from above, as it did last week. A break below would be a bearish signal in the near term, while a hold above could once more reinforce the bullish nature of last month’s breakout.
One thing that is notable is that the momentum indicators have been weakening since mid-July which may suggest the rally has been running on fumes. This kind of divergence isn’t a bearish signal in itself but it could be viewed as a red flag.
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