Let’s discuss oil price action, and related trade opportunities. I think oil is coming closer to a major resistance zone, as can be seen in the daily chart shown below. This region acted as a support some time back, and now may act as a resistance. The price action also suggests that the oil might be topping in the short term. So, I think we should be looking for short term sell opportunities.
Looking at the 4 hour chart of oil, there is a clear move up the trend line, which has acted as support more than a few times. There are also supports at around the 101.80 and 101.20 level. If the oil price breaks below the trend line and support level and closes below it, then we can enter a sell trade once there is a re-test of the broken trend line and support area. This scenario is highlighted in the 4 hour chart shown below. We can also plan to sell at current levels with a tight stop above the last high. However, the risk for this setup should be minimal.
Initial target should be around the 98.00 level, and final target could be around the 96.00 level. Stop should be above the broken trend line and support.
Yesterday’s events and trades:
A lot of fundamental data was released in the European and NY session yesterday. The highlight of the European session was the employment data for the UK. The outcome was a bit on the disappointing side, as the unemployment rate ticked 0.1% higher from 7.1% to 7.2%. This resulted in a short term decline in the GBPUSD pair. Later, in the NY session, the US PPI, building permits, housing starts data and FOMC meeting minutes were released. The data was on the disappointing side. However, the FOMC meeting minutes boosted the US dollar to an extent, and some pairs like AUDUSD and NZDUSD are trading lower after the release.
Daily Outlook:
Today, there are two important events scheduled for the US, including the inflation data and manufacturing PMI figures. The CPI (YoY) is expected to tick 0.1% higher from the 1.5% level. If the outcome does not disappoint, then we can see another round of gains for the US dollar. The EUR/USD pair is still holding the gains, and any strength in the US dollar may put a lot of pressure on the EUR/USD in the short term. Other than this, the Philadelphia Federal Reserve Manufacturing Index is also lined up for the release, which is expected to tick down from 9.4 to 8.0.