Will the oil price stick to its falling trend?

Carlsquare

19. jan. 2023 | 1 Læsetid

As oil is traded in USD, the strength of the USD compared to the investors' local currency is affecting the purchasing power.

For example, suppose the USD strengthens against the euro. In that case, European buyers' purchasing power is reduced, lowering the demand and thus putting pressure on the oil price, and vice versa and all else equal. On the other hand, as illustrated in the chart below, the USD is currently weakening against the euro. That should add support to the oil price.

EUR/USD, daily one-year chart

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The Brent oil price, shown in the charts below, is trying to break up above MA100 and the short, falling trend. Also, note how MACD has generated a buy signal.

Brent oil price (USD per barrel), one-year daily chart

Bull og bear certifikater

+5,65%

Brent Crude Oil Future

Bull og bear certifikater

-5,07%

Brent Crude Oil Future

However, in the weekly five-year chart, it can be seen that oil is facing resistance around its current levels – resistance in the form of falling MA20 and the falling trend line:

Brent oil price (USD per barrel), weekly five-year chart

Going back to the EUR/USD chart, a negative divergence between the EUR/USD and MACD can be seen. That implies that a trend shift in the EUR/USD could occur, thus being a red flag that should be closely monitored. A change in the EUR/USD may cause the oil price to stick to the falling trend.

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence

Risici

External author

This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.

Disclaimer

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future performance.