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Oil’s best week in two years ends with profit taking

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West Texas Intermediate crude is poised to have its best week in two years as the dollar continues to soften and as the OPEC + production cuts kick in.

The backdrop for the rally is OPEC + is delivering on their production cuts, but the last half of the move was mostly supported on the dovish turn by the Fed. The softer dollar helped oil, as expectations have disappeared for the Fed to raise rates in 2019 since the Fed has clearly stated they will be patient and flexible and wait and see what does evolve.  Accommodative monetary policy could continue to help commodities and their currencies.

Last week, China delivered a RRR cut and now we have all the Fed members falling in line with the dovish stance on rates. Clarida said the Fed should be patient, Bullard notes we’ve come to the end of the road on rate hikes, Rosengren stated the Fed could wait for clarity on the next rate move and Fed Chair Powell affirmed the flexible rate outlook.

The Christmas Eve oil low of $42.36 was made on thin volume and we have seen the rebound reach the harmonic number of $10.  Technicians often use harmonic or vibratory numbers to find levels where certain strong moves could run out of momentum.  Today’s pullback in oil prices is more profit taking and a slight bid with the greenback.

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
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