Crude oil price rallied today as investors cheered the latest action from the Federal Reserve and China. Yesterday, the Fed announced an unprecedented move to cushion the markets from the ongoing rout. In the announcement, the Fed said it would buy an unlimited amount of bonds, mortgage-backed securities, ETFs, and corporate bonds. This is in addition to other policies the bank has initiated to support the economy.
Meanwhile, there is hope that China is returning to normal. This is after Hubei Province announced that it would end the lockdown that was started in March. The Hubei lockdown will end on March, 25. The lockdown in Wuhan, the city of 11 million residents will end its lockdown in the coming month. All this sends signs that normalcy is returning to China.
In Washington, Democrats and Republicans are still locking horns on a new $2 trillion rescue package. Democrats have rejected Republican proposals, terming them corporate bailouts. Instead, they have suggested a comprehensive package, that limits how companies will use the funds. For example, they plan to place limitations on executive pay, buybacks, and dividends. Still, investors believe that the two sides will meet in the middle by the end of the week.
The biggest concern for crude oil price is that the world is “swimming” in oil. Saudi Arabia is pumping more than 12 million barrels a day while other OPEC members are doing the same. At the same time, there is a constraint of demand, with many airlines not flying and many cities being in lockdown.
Amid all this, the West Texas Intermediate (WTI) is up by 5.0% while Brent is up by 4.18% at 0820 GMT.
In the 30-minute UK chart below, we see that the price has been on an upward trend since yesterday, when it tested a low of 24.72. This is evidenced by the ABCD pattern. We can also see that the price moved past the 50% Fibonacci Retracement level and tested the 61.8% level. Subsequently, the price retested the 50% Fibonacci level. As such, I expect the pair to move past the 61.8% level and attempt to test the next Fibonacci level at about 29.50.