Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Technical Analyst, Saxo Bank Group
Summary: Crude oil gapped higher at market open Monday. Could move higher but facing strong resistance
Dutch Gas and Henry Hub gas downtrends seem to be exhausting forming bottom and reversal patterns. Wait for uptrend confirmation.
The two leading Crude Oil futures Brent and WTI gapped higher to open and close above the 55 and 100 daily Moving Averages and above the Cloud (shaded area).
RSI for both have closed above 60 showing positive sentiment indicating higher oil prices are quite likely.
WTI Crude oil seems set for a test of strong resistance at around 82.36. The 200 daily Moving Average is coming down just above the 82.36 level adding to the resistance.
However, with the positive RSI an oil price close above 82.36 could pave the way for higher levels. Next strong resistance at around 93.48.
A correction from the 82.36 resist should be expected though but as along WTI does not closes the from Monday short-term uptrend is intact.
IF WTI closes the gap thereby closing back below the 55 and 100 Moving Averages, and below the Cloud bear there could be further downside towards March lows in play.
Weekly chart shows just how strong the resistance at around 93.48 is and that it could be quite a struggle to get up there. 55 and 100 weekly Moving Averages will put a damper to the upside.
Weekly RSI is still below 60 threshold i.e., still negative and if WTI drops back below the upper trendline in the falling channel medium-term bear trend is set to resume.
Brent Crude oil gapped higher trading above the upper short-term falling trendline and seems set for at test of the strong resistance at around 89.37. The 200 daily Moving Average is coming down just above the 89.37 level adding to the resistance. However, if Brent oil can close above 89.37 there is no strong resistance until at around 98.75
Similar to WTI Brent Weekly chart shows just how strong the resistance at around 98.75 is and that it could be quite a struggle to get up there. 55 and 100 weekly Moving Averages will put a damper to the upside.
Weekly RSI is still below 60 threshold i.e., still negative and if WTI drops back below the upper trendline in the falling channel medium-term bear trend is set to resume.
However, If Brent closes the gap created Monday morning thereby closing back below the 55 and 100 Moving Averages, and below the Cloud selling pressure could intensify pushing Brent towards March lows.
Dutch Gas down trend seems to be exhausting. There is divergence on RSI suggesting the selling pressure is easing.
Gas prices have broken above the short-term falling trendline and if Dutch Gas can close above €53 a new short-term uptrend has been established. If Gas closes above 53 RSI will very likely close above 60 threshold i.e., in positive sentiment support the picture of higher prices.
Resistance at around 69.25
On weekly Dutch Gas has formed a Doji Morning Star like candle pattern (circled) which is a bottom and reversal pattern. If Dutch Gas can close above 200 weekly Moving Average there could be medium-term upside to the 0.382 retracement at around 86.31.
However, Weekly RSI is still negative and there is no divergence meaning new lower low is not out of the question. If Gas lose momentum and closes below 37.70 a down wards move to around 26.95 could be seen. First indication of that scenario to play out would be if Dutch Gas slides back below 21 daily Moving Average and daily RSI closes back below 40.
Henry Hub Gas seems to have found support around $2 currently trading in a narrow falling channel. RSI divergence indicates Henry Hub Gas is likely to break above upper falling trendline but if Henry Hub closes below ¤2 down trend could be extended. If that occurs Gas could drop to 1.69, possibly 1.54.
If Henry Hub bounces from the $2 support and closes above upper falling trend line there is upside to 3.025 with resistance at around 2.35 and strong resist at around 2.63.
A close above 3.03 will confirm a double bottom pattern with potential up to around $4.
200 weekly Moving Average is currently around 3.75 and will add to the resistance
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