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

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.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently 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 BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya