Crude oil price tanks as recession fears grow ahead of Fed chair Powell’s testimony

Crude oil tumbled today as risk assets all came under pressure after yesterday’s relief rally.

There have been reports that US President Joe Biden is working on a plan for a gasoline tax holiday. This is ahead of Energy Secretary Jennifer Granholm’s meeting with oil refinery representatives on Thursday.

The WTI futures contract traded as low as US$105.00 today, while the Brent contract went to US$110.29 bbl. Both has recovered somewhat since.

Typical of a risk retreat environment, the high beta Aussie and Kiwi are the notable underperforming currencies. The US Dollar and Japanese Yen strengthened through the Asian session.

In emerging markets, the Philippine Peso fell to a 16-year low. Other EM Asian currencies were also lower to varying degrees against USD.

APAC equites are a sea of red, although Japanese stocks have held up ok while US futures are pointing to a negative start to their cash session.

In an online event, non-voting Richmond Federal Reserve President Thomas Barkin said, “the spirit is, you want to get back to where you want to go as fast as you can without breaking anything.”

This was seen as being supportive of a jumbo hike at the July Federal Open Market Committee (FOMC) meeting. Such aggressive hikes by the Fed have sparked commentary on the likelihood or otherwise of a US recession.

The benchmark 10-year Treasury is steady near 3.26%. Gold is slightly lower on the back a firming USD, trading just under US$ 1,830 an ounce.

Later today, Fed Chair Jerome Powell will testify before Congress where it is anticipated that he will outlay the Fed’s strategy to tackle inflation.

There will be other central bank speakers to look out for, as well as Canadian CPI.

Crude Oil (WTI) Technical Analysis

Crude oil is testing the lower bound of an ascending trend channel. Just below that line is the 100-day simple moving average (SMA) and slightly lower again is a previous low at 103.24.

A break below all of these potential support levels could see bearish momentum unfold.

Such a move would also be below the lower bound of the 21-day simple moving average (SMA) based Bollinger Band which could see volatility break out.

Topside resistance might be at the break points of 111.20 and 116.57.

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