Crude Oil has been rallying
strongly in the past couple of months as the prospects of more economic
stimulus from China, the resilience of other advanced economies and the
production cuts gave the black gold a tailwind to reach the key $83 level. The
first breakout of the resistance failed though as Chinese economic data remains
ugly and yesterday’s rate cuts by the PBoC may have been seen as not enough in
light of the data. Looking forward, the market may even fear inflation
remaining higher for longer requiring more rate hikes by the central banks and
ultimately a worse recession.
WTI Crude Oil Technical
Analysis – Daily Timeframe
WTI Crude Oil Daily
On the daily chart, we can see that WTI Crude Oil
has recently probed above the key $83 resistance but got
smacked back down soon after as the economic problems in China continue to
weigh on the global economy. This fakeout might be a big bearish signal and
lead to a fall all the way back to the $75 support. In fact, the buyers will
need another strong break above the resistance to get the conviction to target
the $93 level.
WTI Crude Oil Technical
Analysis – 4 hour Timeframe
WTI Crude Oil 4 hour
On the 4 hour chart, we can see that the bullish
trend has recently been broken as the price fell below the upward trendline. This
breakout is bearish for Crude Oil as it gives the sellers more reasons to keep
pushing to the downside. In fact, we can expect the sellers to step in at every
pullback now and target the $75 support.
WTI Crude Oil Technical
Analysis – 1 hour Timeframe
WTI Crude Oil 1 hour
On the 1 hour chart, we can see that from
a risk management perspective, the sellers have a strong resistance zone around
the $81.60 level where we can find the confluence with
the 50% Fibonacci
retracement level, the previous swing low and the
trendline. The buyers, on the other hand, will need the price to break above
this trendline to start piling in and target a break above the $83 resistance.
Upcoming Events
This week is a
bit empty on the data front and the most important release will be the US
Jobless Claims tomorrow. Readings in line with expectations shouldn’t be market
moving but big deviations should offer strong reactions. In fact, in case we
see a big beat, we may see a pullback in Crude Oil but it’s likely that the
hawkish expectations around interest rates will eventually prevail and push the
price back lower. On the other hand, a big miss is likely to cause recessionary
fears and lead to a selloff.
See also the video below: