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Analyzing the Factors Exerting Downside Pressure on Oil


7 December 2023 Written by Feng Zhou  Senior Market Analyst Feng Zhou

As financial markets continue to respond to a multitude of economic and geopolitical factors, it's crucial to stay informed and assess the various dynamics that influence asset prices. In this analysis, we will delve into the factors that are currently putting downward pressure on Brent oil, the US Dollar Index (DXY), and the AUD/USD currency pair.

Brent Oil Faces Selling Pressure

Brent oil has been actively declining and is currently trading at $75.00 per barrel. This decline can be attributed to several key factors:

Given these factors, there is a recommendation to short Brent oil with a target price of $70. This strategy involves selling the asset with a stop order at $74.50, targeting $70, and setting a stop loss at $76.00.

Analyzing the Factors Exerting Downside Pressure on Oil

US Dollar Index (DXY) and Weak Fundamentals

The US Dollar Index (DXY) is hovering around 104.00, but its further recovery is limited due to weak fundamental factors. Here are the key considerations:

Considering these factors, there is a suggestion to initiate a sell position in DXY with a sell stop at 103.80, a target price of 103.20, and a stop loss at 104.00.

AUD/USD Under Pressure from Weak GDP Data

The AUD/USD currency pair is currently trading at 0.6530, and it faces downward pressure primarily due to weak third-quarter gross domestic product (GDP) data:

Should sentiment persist in its current state, the AUD/USD pair may continue to test local lows. Traders can consider a sell position in AUD/USD with a sell stop at 0.6530, a target price of 0.6450, and a stop loss at 0.6560.

In conclusion, the financial markets are influenced by a complex interplay of economic data, geopolitical events, and market sentiment. Understanding the factors at play in Brent oil, the US Dollar Index, and the AUD/USD pair is essential for informed decision-making in these volatile times. Traders and investors should exercise caution and adapt their strategies to changing market conditions.

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