VOT Research Desk

Market Analytics and Technical Considerations

Risk aversion, WTI crude oil, and the opening of Monday markets

Friday saw a collapse in crude oil prices as the futures market entering implied volatility.

Wall Street’s cautious risk aversion creates a negative tone for trade in Asia.

The break of the WTI Ascending Triangle is still gaining speed.

As the new trading week gets underway, crude oil prices appear to be in danger.T he chart below shows that the front-month spread in WTI futures entered contango for the first time in about a year on Friday. This is what happens when the futures price is higher than the spot level, which is frequently caused by imbalances in supply and demand in the near future. For the oil market, this is exceptionally negative.

We have heard a lot of hawkish Fedspeak over the past week .Official communications have been fairly straightforward. The Federal Reserve is still committed to raising rates, despite the fact that the rate of tightening is likely to slow down.  James Bullard, president of St. Louis, said that he thinks rates will be between 5.25 and 5.25 percent at the very least.

In point of fact, the flow of news from officials at the central bank over the past week has contributed to a cooling of the fall in Treasury yields and a strengthening of the US dollar. Oil prices are falling as a result of global monetary tightening and the strengthening of the dollar. This is despite recent efforts to reduce output by OPEC+ members.

The Asia-Pacific trading session on Monday appears to be fairly light. NZD/USD is likely awaiting this week’s RBNZ rate decision for its next big move, but New Zealand credit card spending will cross the wires at 2 GMT. The cautious risk aversion from Friday’s session on Wall Street may set a negative tone for markets to begin with. That may put pressure on crude oil prices.

Technical Analysis of Crude Oil The price of crude oil has continued to fall below an Ascending Triangle pattern. WTI may be on track to breach the September low of 76.281 at the final target of the triangle, revealing the 72.249 level of the 100 percent Fibonacci retracement. Otherwise, a higher retracement places the focus on 82.934, the midpoint of the extension.

Simple Moving Averages – Daily