Risk assets like equities, cryptocurrencies or oil plunged yesterday in a broad market sell-off. Policy tightening and global economic slowdown resulting from tight lockdowns in China drove asset prices lower. Situation has calmed down a bit and a small relief rally can be spotted today.
Taking a look at Brent chart (OIL) at H4 interval, we can see that price plunged to 23.6% retracement of correction launched in late-March 2022 ($103.00 area). Declines were halted there and recovery started. OIL is trading 1% higher today and tests resistance zone ranging below 38.2% retracement in the $106.00 area. Upon a successful upside breakout, the upward move may extend towards the next resistance levels marked with 50, 61.8 and 78.6% retracements. API report in the evening may provide some short-term volatility but is unlikely to be any kind of gamechanger. A theme to watch for the oil traders apart from news from China is EU embargo on Russian oil. So far, Hungary voiced strong opposition but it is said that some progress has been made and agreement on the shape of embargo may be reached following further talks. Final decision is likely to include some exemptions as well as a deadline for implementation and those two factors will have the biggest impact on market prices as they will show how effective sanctions will be.