Oil brief: Crude oil rallies with gold prices as markets entertain a less hawkish Fed after BoE QE
WTI crude oil rallies alongside gold prices and the S&P 500 on Wednesday; after the BoE temporarily restarted QE, markets lowered Fed rate hike bets and are markets setting up for disappointment? WTI bounced, but SMAs eyed.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/news-article-image-folder/BG_bank_of_england_boe_london_3213518.jpg/jcr:content/renditions/original-size.webp)
WTI crude oil prices rallied five percent on Wednesday in the best daily move in over four months. Its climb was not an isolated event, however. Multiple assets rallied across financial markets over the past 24 hours in a synchronized systemic move.
Looking at the chart below, we can see that oil gained alongside gold and S&P 500 futures. This is as the US dollar, and crucially, UK 30-year government bond yields fell.
You can summarize the chart below with two words, “risk-on”.
Clearly, something major happened in markets that caused traders to improve their moods. As has been the case of late, the market-moving event originated in the United Kingdom. Despite the highest inflation in decades, the Bank of England effectively restarted quantitative easing, at least temporarily and in a limited amount.
The new-bond buying program is to the tune of 65 billion British pounds for long-dated Gilts. The pace is about five billion each day until October 14th. This follows the new government’s fiscal proposal, where stimulatory measures where announced such as tax cuts. This means that fiscal and monetary policies are heading in counterintuitive directions. The markets punished the Sterling as it briefly hit a record low on Monday.
So, what does this have to do with crude oil? The commodity is closely linked to the swings of the global business cycle. Following the BoE’s action, global government bond yields fell, even in the United States. This reflected a dovish shift in monetary policy expectations. Markets went from pricing in almost two Fed rate hikes in 2023 to less than one. Less hawkish central banks could decrease global growth slowdown bets.
What could this mean for oil over the remaining 24 hours? Well, if Asia-Pacific markets extend Wall Street’s rosy session, ten WTI could be in for another positive day. Down the road, Fed policymakers might be questioned again about the possibility of a pivot or perhaps a measure like what the BoE pulled off.
This could set crude oil up for disappointment.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/oilbrief290922.png/jcr:content/renditions/original-size.webp)
Crude oil technical analysis
On the daily chart, WTI has pushed higher for a second consecutive day after bouncing off the 78.6% Fibonacci retracement at 76.787. Still, WTI remains below the 20- and 50-day Simple Moving Averages (SMAs).
The latter may hold as key resistance, maintaining the broader downside focus. Confirming a breakout under the 78.6% level exposes the 61.696 – 65.6 support zone which has its beginnings in May 2021.
Crude oil – daily chart
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/au/images/News-and-articles/oilbriefTWO290922.png/jcr:content/renditions/original-size.webp)
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
![](http://a.c-dn.net/c/content/dam/publicsites/igcom/uk/images/ContentImage/Forex global component NA banner.jpg/jcr:content/renditions/original-size.webp)
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices