Crude Oil eventually
reached the $95 level as the resilience in the global economy and the supply
cuts from Saudi Arabia and Russia caused an incredible rally in the past couple
of months. The bullish sentiment though is now overstretched, and we are now starting
to see bearish signs that are likely to end up in weaker demand and thus lower
prices. In fact, the latest rise should weigh even more on consumption given
the context of tighter monetary conditions. We are also seeing the US Dollar
getting stronger every day and the stock market falling which is likely to add
to the negative sentiment. All of the above might lead to lower oil prices
going forward especially if the economic data starts to deteriorate notably in
the next few months.
WTI Crude Oil Technical
Analysis – Daily Timeframe
WTI Crude Oil Daily
On the daily chart, we can see that after tapping
into the $95 level, Crude Oil sold off towards the $88 price area. From a risk
management perspective, the buyers would be better off waiting for the price to
come into the trendline, where
we can also find the confluence with the
50% Fibonacci retracement level,
before stepping in again to target a new high. The sellers, on the other hand,
will want to see the price breaking through the trendline to pile in even more
aggressively and take the price into the $65 region.
WTI Crude Oil Technical
Analysis – 4 hour Timeframe
WTI Crude Oil 4 hour
On the 4 hour chart, we can see that we had a divergence with the
MACD right
when the price was trading into the $94 resistance. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we are still experiencing a pullback as long as the
price doesn’t break the trendline, which would confirm the reversal. The
support around the $88 level is holding for now, but at this point we might see
it break for the much stronger one around the $86 level.
WTI Crude Oil Technical
Analysis – 1 hour Timeframe
WTI Crude Oil 1 hour
On the 1 hour chart, we can see that Crude
Oil got rejected perfectly from the downward trendline and the 50% Fibonacci
retracement level as the sellers stepped in with a defined risk above the
trendline to position for a drop into the major trendline around the $86 level.
If the price breaks below the $88 support, we can expect the bearish momentum
to pick up into the $86 level. The buyers, on the other hand, will want to see
the price breaking above the downward trendline to invalidate the bearish setup
and position for a rally into new highs. Alternatively, as mentioned
previously, the buyers will be waiting around the $86 level with an even better
risk to reward setup.
Upcoming Events
Today on the agenda we have the ADP report and the
ISM Services PMI. Tomorrow, we will see the latest Jobless Claims data, which
continues to show a solid labour market. Finally on Friday, it will be the time
for the NFP report which is the only one the Fed will see before its next rate
decision. The oil market is likely to respond negatively to bad data and
positively in case of good figures.
See the video below: