Crude oil price gets punished ahead of Fed over recession fears. Will WTI fall further?

Crude Oil, US Dollar, Gold, Treasuries, Fed, FOMC, CAD, NOK – Discussion Highlights

  • Crude oil prices have fallen further on concerns about a slowdown in the US economy.
  • US banks remain in focus and some familiar names are under pressure.
  • All eyes are on the Fed today. Will their aggressive statements put pressure on the WTI price?

Crude oil eased in North American trade yesterday but has stabilised by Asian trade, while the US dollar is generally weakening at the start of Wednesday.

The WTI futures contract remains below USD 72 per barrel, while the Brent contract is trading at USD 75 per barrel.

Risky assets fell out of favour, while gold and government bonds gained as sentiment turned sour on fears that there could be more US banks with weak balance sheets.

Recession fears appear to be running rampant after weak US jobs and factory orders data ahead of the Federal Reserve’s interest rate decision later today.

Gold prices are trending towards the US$2,020 per ounce mark, while the yield on the two-year US Treasury bond is back below 4%.

Regional banks bore the brunt of the misery: PacWest Bancorp and Western Alliance Bancorp closed down 27.8% and 15.1% respectively.

The Dow Jones, S&P 500 and Nasdaq posted losses of more than 1% in the cash session, but have stabilised so far today.

Following Wall Street, APAC equity markets that were open today are also all down. Mainland China and Japan, among others, are on holidays.

Sentiment was further soured by the release of a report by activist investor Hindenburg questioning the financial integrity of Icahn Enterprises, which pushed the company’s share price down 20%.

After the oil-dependent Canadian dollar and Norwegian krone weakened significantly yesterday, all G10 currencies are trading firmer against the US dollar to varying degrees today.

The US Federal Reserve takes center stage today, but the full economic calendar can be viewed here.

TECHNICAL ANALYSIS of WTI CRUDE OIL

After closing the gap created by the OPEC+ production cut announcement, the WTI price continued its slide. The price is below all simple moving averages (SMA) on a daily basis, which could indicate that bearish momentum is developing.

Support could be at the 78.6% Fibonacci retracement level of the move from 64.36 to 83.53 at 68.46. Further down, support could be at the previous lows of

On the upside, resistance could be at the nearby breakout levels in the 72.25 – 72.46 area and ahead of 73.93.

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