WTI looks for firm direction above 200-day SMA amid trade optimism, strong USD

• WTI buyers catch a breath after the largest gains in two weeks.
• Optimism surrounding the phase-one, USMCA deal, upbeat US data favor the buyers.
• Strong USD, receding geopolitical tension and increasing buffer at OPEC keep sellers hopeful.

WTI buyers catch a breath after registering the largest gains in two weeks. The black gold trades near $58.60 by the press time of Friday’s Asian session.

Trade optimism signals economic recovery …

After the years of trouble, the US and China recently signed the phase-one deal and are also discussing the phase-two of its. Additionally, the US, Mexico and Canada also agreed on the trade terms and the US Senate passed the bill governing the same on Thursday.

Trade wars have been the key reason for a pause in the global energy demand and a solution to the same works positively for the oil benchmark. The recent poll from Reuters suggests the Euro Zone economic activity has bottomed out. It should also be noted that China’s activity numbers have also been positive off-late. However, the US has an upper hand in both the deals, which may pose a threat to the trade peace and hence the risk of failure is still on the cards.

On the contrary, receding odds of the US-Iran war and the US dollar strength, which generally weighs on the commodity basket as a whole, seem to cap the near-term upside.

Also challenging the buyers is the argument by the Australia and New Zealand Banking Group (ANZ) that the Organization of the Petroleum Exporting Countries’ (OPEC’s) spare capacity a buffer to geopolitical supply disruptions. Adding to note, The oil-producing cartel has recently raised its forecast for global oil demand growth in 2020 by 0.14 million barrels per day (bpd) to 1.22 million bpd.

Investors will now concentrate on China’s headline data including GDP, Retail Sales and Industrial Production, up for publishing at 02:00 GMT, for the immediate direction.

Technical Analysis

Unless providing a daily close below 200-day SMA level of $57.70, prices are less likely to revisit November month's bottom surrounding $55.00. This also indicates likely recovery to 21-day SMA, at $60.55 now.