OPEC and Russia production deal sends Oil soaring

This article was last updated on April 16, 2022

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Market Insights

Over the weekend, non-OPEC ‎agreed to deliver on nearly 600,000 bbl per day of production cuts including 300,000 from Russia. In addition to this Saudi Arabia indicated it is prepared to make even deeper cuts than it has already announced to fix the oil market. Comments that Saudi Arabia and Russia among others are putting aside their political differences to make these deals happen suggests that the market share was of the last two years is over (for the moment anyway).

This news has sparked a big rally for crude oil ‎sending WTI and Brent both up 4.0% to their highest levels in over a year. The logjam for WTI in the low $50s appears to have finally been broken. Oil currencies like CAD, NOK and RUB are all rallying in tandem with oil. This may also have a positive impact on energy stocks today.

Stock markets around the world are mixed to start the week. US index futures are flat (Dow and S&P) to down 0.4% for the NASDAQ. The FTSE and Dax are down 0.2%. Italy’s FTSEMIB is up 1.1% with the troubled Monte Paschi bank trying to raise private capital before going to the government for a bailout. EUR and GBP are bouncing back a bit today.

Chinese indices fell with Shenzen down 2.4% and the Hang Seng down 1.4% dragged down by problems in China’s insurance sector. 

Capital continues to leave defensive havens keeping the pressure on gold. US treasury bond yields traded above 2.5% for the first time in two years as traders speculate a US rate hike this week could be followed by several more next year. This is higher than Italy with its banking problems at 2.0%, Canada at 1.75% and the UK at 1.50% even with Brexit moving forward. Between the higher US Dollar and rising US interest rates dampening the earnings outlook of a rising US stock market, something may need to give soon and the FOMC meeting is the most likely flashpoint

Chart Signals

Chart Signals: Oil breaks out, reversals underway in gold and Germany 30

There has been a lot of technical action to start the week. We’re seeing a number of spikes and reversals today that suggest significant corrections could be starting particularly in gold, JPY, Germany 30 and UK 100. Oil is breaking out of an ascending triangle base today pulling CAD higher along for the ride.

US 30 has paused for now but appears some traders may be set on testing 20,000. This last time I saw something like this was Silver’s big drive toward $50.00 a few years ago which quickly thereafter ended in tears.  

North American and European Indices

US 30 may be forming a shooting star candle today having spiked up toward 19,865 then sliding back into the 19,750 to 19,800 area near where it started. RSI extremely overbought so index remains vulnerable but at the same time I have the feeling it’s being drawn toward a test of the 20,000 level.

US SPX 500 remains under accumulation advancing on 2,270 before backing and filling into the 2,255 to 2,265 area. Overbought RSI indicates potential for a correction but uptrend still intact for now. Next support in place near 2,235 with next potential measured resistance near 2,280.

US NDAQ 100 is testing channel resistance in the 4,900 to 4,920 area which has held so far but if it gives way, next resistance may appear at the 5,000 round number. The RSI is trying to break out of a downtrend testing a resistance line. Recently trading between 4,860 and 4,880 with next support at the 50-day average near 4,815.

UK 100 took a run at 7,000 earlier today trading up toward 7,035 before the door slammed shut and the index was pounded back into the 6,925 to 6,950 area in what looks like a normal trading correction with breakout point support holding so far. Additional downside support possible near 6,900 and the 50-day average.

Germany 30 is having a bearish reversal day having rallied up toward 11,350 then diving back down into the 11,140 to 11,200 range with next potential support at the 11,000 round number. An overbought RSI suggests potential for a trading correction.

Commodities

Gold has a big support test underway today. The price briefly dipped below $1,155 toward $1,152 before rebounding toward $1,258, A bullish hammer candle is forming which suggests a selling climax and bear trap may be happening. Initial rebound resistance possible near $1,172. RSI remains oversold so a trading bounce still possible.

Crude Oil WTI has a big breakout underway today! The price cleared $52.00 to complete an ascending triangle base and signal the start of a new uptrend. The price advanced on $54.00 where initial resistance has appeared with support rising toward $53.30. RSI confirms upward momentum increasing. Next potential resistance tests possible near $54.90 and $60.00 both based on measured moves. 

FX

US Dollar Index continues to struggle with 102.00 resistance and has been knocked back toward 101.20 with next potential support near 101.00 then 101.85 a 23% retracement of its recent uptrend. A lower high in the RSI indicates upward momentum weakening and a downturn in momentum pending. 

USDJPY has broken out again but could be peaking with a shooting star candle forming. The pair shot up toward 116.00 but has since slumped back toward 115.50 with next support possible near 115.30 then 115.00. RSI really overbought and a negative divergence indicate upward momentum slowing and a significant trading correction possible.

EURUSD continues to hold above $1.0500 while RSI holding support at 40 and a higher low suggests the recent downtrend may be over and base building underway. The pair has bounced up toward $1.0600 with next resistance possible near $1.0620 then $1.0685 a Fibonacci level.

EURGBP has stabilized in the 0.8380 to 0.8430 range recently trading near 0.8390 confirming the recent breakdown under 0.8460. Next downside support possible between the 200-day average and a prior low near 0.8290 and 0.8260 a Fibonacci test.

GBPUSD remains under accumulation with higher lows below $1.2800 forming a bullish ascending triangle base. The pair recently held trend support near $1.2545 and has bounced up into the $1.2600 to $1.2640 area with next resistance near $1.2695 a Fibonacci level. RSI holding 50 and rising confirms upward momentum increasing.

USDCAD remains under distribution, with resistance falling from near $1.3200 toward $1.3150 and the pair near $1.3125 with next potential support near $1.3100 then the $1.3000 round number. RSI getting oversold but confirms downward momentum still increasing for now.

CADUSD continues to rally, clearing $0.7600 and is now testing an eight month downtrend resistance line near $0.7620 with the 200 day average looming near $0.7655. Rising RSI indicates upward momentum still increasing.