WTI Price Analysis: Tests strength of breakout ahead of oil inventory

• Oil prices are making efforts for recovery after a corrective move as US inflation is returning to desired levels swiftly.
• Institutional investors have cut their annual GDP forecast for China and have guided for more stimulus requirements.
• The oil price is testing the strength of the breakout and might resume its upside journey.

West Texas Intermediate (WTI), futures on NYMEX, have corrected to near $75.40 in the Asian session after a stellar rally. The oil price is expected to resume its upside journey as inflationary pressures in the United States economy have started easing. After a significant decline in June’s Consumer Price Index (CPI), and easing labor market conditions, retail demand has taken a hit due to higher interest rates by the Federal Reserve (Fed).

Meanwhile, economic recovery in the Chinese economy has faltered considering its second-quarter Gross Domestic Product (GDP) numbers. This has forced institutional investors to cut their annual GDP forecast and have guided for more stimulus requirements. It is worth noting that China is the largest importer of oil in the world and bleak economic growth in China could impact the oil price.

Going forward, oil inventory data for the week ending July 14 will be keenly watched. Oil stockpiles to be reported by US Energy Information Administration (EIA) are expected to report a drawdown of 2.25 million barrels.

Earlier, WTI delivered a breakout of the consolidation formed in a range of $67.20-$74.70 on a four-hour scale. The oil price is testing the strength of the breakout and might resume its upside journey. The 50-period Exponential Moving Average (EMA) at $74.40 is providing support to the oil bulls.

Meanwhile, the Relative Strength Index (RSI) (14) has slipped into the 40.00-60.00 range. This indicates that the bullish momentum has faded, however, the upside bias is still intact.

Going forward, a decisive break above July 17 high at $76.00 would expose the asset to April 26 high at $77.86, followed by the round-level resistance of $80.00.

On the flip side, a breakdown below July 17 low at $73.78 would drag the asset toward July 03 high at $71.83. A slippage below the latter would expose the asset to June 29 low of around $69.00.

WTI four-hour chart