Following a bullish jolt from lows set in the Asian session on Monday, Brent Crude Oil Futures (NYMEX: BB) have been lightly traded in Tuesday’s open as traders closely anticipate Federal Reserve Jerome Powell’s Testimony. With markets susceptible to the U.S. Federal Reserve’s reaction to economic data, volatility will likely pick up as traders reassess the Fed’s interest rate policy. 

The demand side has picked up and is on the path to recovery following China’s reopening. In contrast, the supply side has remained relatively stable with no significant jump in supply by the major producers. Price action has moved higher as a result, and short-term volatility has resulted from traders’ sentiment on future interest rates. 

Technical  

Brent Crude Futures have traded upward in a steep ascending channel. Support and resistance are currently at the $84.42 and $86.53 per barrel (BLL) levels, respectively. 

With price currently located at resistance, an intermediate reaction played out as bears respected the supply nature of the zone. If bearish momentum continues to build up, price will probably be directed towards the dynamic support of the ascending channel. 

Alternatively, if bulls defy the downside, a breakout of the $86.53 BLL level on high volume could signal a leg-up in crude oil’s price, with the next probable target at the $88.92 level.  

Summary 

A surge in China’s economic activity and crude oil demand has cushioned bulls from excess downside price action. Sentiments will likely be defined by the Fed Chair’s Testimony and hint at any interest rate direction. Crude oil prices will probably be subdued by the least expected 50 basis point rate hike. However, the downside will likely be limited by the supply-demand imbalance. 

Sources: Insider, Reuters, TradingView