• Chinese trade data disappoints again
• Saudi and Russian cuts continue to support prices
• Divergence a potential red flag

The data from China appears to be weighing on oil prices today, which is understandable with it being the world’s second-largest economy.

Still, oil remains not far from yesterday’s highs, having recovered more than 20% since late June.

Clearly, the cuts from Saudi Arabia and Russia are working, on top of all of those implemented by OPEC+ since late last year.

The market now looks much tighter and the economic outlook is potentially a little brighter too, with central banks either at or very close to the end of their tightening cycles.

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Is the oil rally running on fumes?

We saw plenty of support between March and June around $70-$72 but the price has since rallied strongly, breaking through the descending channel and, more recently, the 200/233-day simple moving average band.

BCOUSD Daily

Source – OANDA on Trading View

That’s taken it back into bullish territory, in theory, and today it’s testing that as support from above, as it did last week. A break below would be a bearish signal in the near term, while a hold above could once more reinforce the bullish nature of last month’s breakout.

One thing that is notable is that the momentum indicators have been weakening since mid-July which may suggest the rally has been running on fumes. This kind of divergence isn’t a bearish signal in itself but it could be viewed as a red flag.

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