Brent crude oil price slumps to the lowest level in July as the USD GDP and employment data disappointed investors who are expecting to see some signs of faster recovery. The rising number of new coronavirus infections in the Southern states started to harm the economic recovery process, something the Fed Chairman Powell warned in his press conference yesterday. Fed kept the interest rates to historic low levels and reassured that it would continue with the accommodative monetary policy until 2021 or until the employment return to normality. Fed also extended the USD swap lines with central banks around the globe until March 2021 even there is no demand in the last month, but Fed wants to be sure that there will be no liquidity problems in the future.
The big news of the day was the U.S. GDP. Second-quarter GDP contracted by 32.9% slightly better than expectations for a contraction of 34.1%. The GDP Price index reported at -2.1% below the forecast of 1.1% in the second quarter of 2020.
The U.S. Initial Jobless Claims reported at 1434K better than forecasts of 1450K in the week July 24, but it is still staying above the 1 million mark for the third month showing that the U.S. economy has a long way to go to reach pre-coronavirus levels. The Continuing Jobless Claims is at 17.018M well above the estimates of 16.2M in the week of July 17.
Weak economic data weigh today in crude oil price as investors fear that the rising number of new coronavirus cases will freeze the recovery and slow the rebound in crude oil demand. The Energy Information Agency (EIA) announced that U.S. crude oil inventories dropped by 10.6M barrels to 526M barrels for the July 24 week.
Brent Oil Price Daily Technical Analysis
The crude oil price is 2.76% lower at $42.54 but off the daily lows that hit earlier during the European trading session. The price hit the lowest level since July 1 and tested the 50-day moving average at 41.41 but managed to rebound, keeping the neutral picture intact.
The crude oil points to more sideways trading as long as it stays above the critical 50-day SMA. If the price breaks below 41.41 might target 39.38 the low from June 25. The next strong support stands at 34.85 the 100-day moving average.
Bullish traders will face the intraday resistance at 43.85 today’s top. A break above would challenge the upper bound of the recent consolidation phase at 44.76. The long term resistance would be met at 47.46 the 200-day moving average, which if breached would signal the end of the bearish trend for oil.