WTI bounces back amid US hiring boom, but rate hikes and slowdown worries persist

• WTI rebounds with a 3% gain, but rate hike fears loom large on the oil market.
• US hiring surge supports Wall Street recovery, softens greenback’s impact on oil prices.
• China’s weakening manufacturing activity weighs on WTI despite OPEC+ output cuts.

Western Texas Intermediate (WTI), the US crude oil benchmark, climbed more than 3% on Friday but remained set to finish with more than 7% losses on fears for further rate hikes and a global economic slowdown. Hence, WTI is trading at $70.96 PB after hitting a low of $68.54.

WTI fights for traction amid economic uncertainties

Wall Street is posting a recovery after the US Bureau of Labor Statistics (BLS) revealed that hiring in the US is picking up, adding 253K jobs in April, as shown by the Nonfarm Payrolls (NFP) report. Although it triggered a jump in US Treasury bond yields, the greenback is weakening, offering some cushion to WTI prices.

WTI’s plunged after a report from the National Bureau of Statistics (NBS) in China revealed that manufacturing activity in April continued to weaken, later confirmed by the Caixin PMI report. That comes even after the Organization of Petroleum Exporting Countries and its allies, the OPEC+, moved to reduce its crude oil output by more than 1 million barrels per day in an effort to underpin oil prices.

Although it spurred a jump of more than 6% at the beginning of April, WTI erased those gains and some more.

Sources cited by Reuters said, “Crude is trying to reverse the recent washout in prices triggered by higher interest rates and recession fears mostly in the banking sector.”

WTI Technical Analysis

From a technical perspective, WTI is downward biased, but the May 4 price action formed a large hammer preceded by a downtrend, suggesting that WTI could rally soon. The Relative Strength Index (RSI) indicator is approaching the neutral level, aiming higher, suggesting that buyers are gathering strength.

If WTI achieves a daily close above the May 3 daily high of $71.74, that will form a morning star, a bullish three-candle pattern, which could pave the way for further gains. That said, WTI will face solid resistance at the confluence of several EMAs, with the 20-day EMA At 74.86, followed by the 50-day EMA at $75.94, before testing the 100-day EMA at $77.54.