After a 4% jump in crude, I am waiting for the next level of resistance to fade the move. Fundamentally though, things are beginning to look a lot worse for the Russian energy industry as major technical knowledge has exited the industry due to sanctions. A loss of 4.5M bpd would be very significant and could also lead to the US banning exports.
Today, the pound fell after CPI unexpectedly rose above expectations, and UK Chancellor Sunak offered promised changes in earnings and tax reforms and recently announced energy measures. The spring budget release changes will mean a middle-class household earning £27,500 will be about £360 worse off than it was last year, according to economists at the Institute for Fiscal Studies. As the chancellor explained in his Spring Statement, consumers should expect prices to rise faster later this year. Though, from July, National Insurance will be paid on income over £12,570 a year - the same level at which income tax begins to be paid. Commenting on the war in Ukraine, which is pushing oil prices higher, the chancellor announced a 5p a litre fuel duty reduction for the next year, which takes some of the pain out of rising prices. RAC motoring organization claims that moving reduces the cost of filling up a 55-litre family car by £3.30.
The FTSE100 appears to have topped out at 7500 and could be coming back to test the weekly support at 7264. I’ll be watching for a break, retest and continuation lower of the rising trendline for a possible short. The European bourses all turned red at the London close on news from Russia, especially the announcement that Russian gas will have to be paid in Rubles, even on existing contracts. German Vice-Chancellor and Minister for Economic Affairs and Climate Action Robert Habeck said the announcement was a breach of contracts. The EU is trying to get the whole trading bloc to work as one and have opened negotiations with the US for the supply of LNG from America. Germany has been unwilling to cut ties with Russian energy thus far.
The forex heatmap is more risk-on into the US session's 2nd half, with the pound looking to be the weakest currency and the Australian dollar and Swiss franc battling it out for the strongest currency.
The US dollar was unable to get above the recent intraday swing high and has left a relative equal double top with some stops above. A break of the rising trendline and a subsequent break of market structure could signal further downside pressure. In the US scheduled news today, new home sales were down 2% in February and US crude inventories showed a draw of 2.5 million barrels.
The tightening energy markets could be about to get tighter as Russian oil is finding it even harder to be exported or unloaded. Russia estimates that there is a supply deficit currently of 1 million barrels per day and Brent certainly moved higher on the draw of weekly US stocks.
I am waiting to see if the price of Brent rejects the $119.57 level which is a daily low, as the ActivTrader sentiment indicator is showing there is still a massive retail long position. This is usually a counter-trend signal, and the daily resistance level could be the best place to fade the move. Or at least anticipate a subsequent change in direction between that level and the recent significant high.