Oil has been trading higher at the beginning of the European cash session but sentiment changed following release of flash PMI indices for July from French and Germany. Manufacturing indices from both major European economies dropped below the 50 threshold, indicating a contraction in the sector. Manufacturing PMI for the whole eurozone also dropped into contraction territory, from 52.1 to 49.6 in July (exp. 51.0). A recession in Europe is becoming more and more real risk with the gas crisis and ECB tightening underway. Oil price is reacting to these data as recession, if materializes, would likely lead to demand drop.
Taking a look at OIL.WTI chart at H4 interval, we can see that price was testing $97.50 resistance zone this morning but pulled back below it following release of PMIs. DRop was halted slightly ahead of the $95 support zone and now a recovery run above the 50-period moving average (green line) can be observed. The overall outlook is rather bearish given that price failed to break above the upper limit of market geometry earlier in the week and thus confirmed the bearish trend.
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Source: xStation5
