Weekly data: Cautious optimism on Brent holds

This article was submitted by Michael Stark, market analyst at Exness.


Brent Crude (UKOIL) has rebounded fairly strongly after last week’s surprising move by OPEC+ to expand production in January. Generally, markets’ initial worries about omicron seem to have been excessive, so demand might start to increase more significantly early next year if current expectations hold for a relatively mild disease.

Large intraday losses on 2 December ended not far above the key support around the psychological area of $65, which is also just above the 100% weekly Fibonacci retracement. As evidenced by ATR around 3.85, volatility has increased enormously since the end of November, but a move back down to retest $65 isn’t favourable in the immediate future.

‘The likely scenario as of now seems to be a sideways trend over the next few weeks,’ said Michael Stark, an analyst at Exness: ‘There’s obviously very strong buying demand in the area around $65, while there’s no clear fundamental driver for the price to retest recent highs. Traders are now looking for significant confirmed data on omicron as well as possible revisions to outlooks for demand in the first half of next year.’

Nasdaq not ready to dive yet

After a retracement of nearly a thousand points from late November to 3 December, the Nasdaq 100 (USTEC) has bounced since Monday 6 December. As above for oil, it seems this week that omicron isn’t the great threat initially feared, while certain major tech names such as Apple, Alphabet and Microsoft have shored up the index as many smaller constituents have made losses.

‘Statistically speaking, it’s more common for a crash or significant correction to happen on a Monday than a Friday,’ said Michael Stark of Exness: ‘The fact that it didn’t come on Monday is a signal for many participants that we’re not going strongly down and it’s time to start buying the dip. Still, it’s wise to watch the market’s reaction to American data on Friday.’

Two failed tests of the 100 SMA on 3 and 6 December seem to establish this area as an important dynamic support which might now have a better chance of holding than in late September and early October. As above for oil, volatility has surged over the last fortnight, with ATR now reading about 310. Recent high volume with mostly buying suggests a retest of the latest high sooner or later, but volatility might increase even further at the end of this week around American inflation.


Disclaimer: opinions are personal to the author and do not reflect the opinions of Exness or LeapRate.

Read Also: