Crude Oil eventually sold
off from the $94 resistance as the demand side might have come into question
due to elevated prices amid tighter monetary conditions, rising US Dollar and
global yields, and falling equity prices. Crude Oil opened higher on Monday due
to the outbreak of the war between Israel and Hamas over the weekend as the
market is still trying to see if the supply side is likely to be affected or
not. As long as the conflict remains confined to Israel and Hamas, the supply
side shouldn’t be affected, but if we get an escalation and other Arab
countries join Hamas against Israel, like for example Iran, then Crude Oil
prices will likely surge to new highs.
WTI Crude Oil Technical
Analysis – Daily Timeframe
WTI Crude Oil Daily
On the daily chart, we can see that WTI Crude Oil
tapped into the $95 resistance and sold
off for days with almost no pullback into the $83 support. The price bounced on
the support and opened higher due to the outbreak of the war in Israel over the
weekend. The break below the trendline could
signal further downside incoming with the sellers likely to lean on the broken
trendline and the 38.2% Fibonacci retracement level to
position for another selloff towards the lows.
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
massive divergence with the
MACD as the
price was approaching the resistance zone. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, we
got a big reversal into the $83 support where the buyers stepped in with a
defined risk below to position for another rally into the highs. On this
timeframe, we might have early signals of an incoming rally as the price broke
above the downward trendline and the moving averages crossed
to the upside.
WTI Crude Oil Technical
Analysis – 1 hour Timeframe
WTI Crude Oil 1 hour
On the 1 hour chart, we can see that we
had another divergence with the MACD right around the $83 support which might
have given the buyers a confirmation of an imminent bounce. The price is now
consolidating between the $85 support and the $87 resistance as the uncertainty
around the macro and geopolitical picture increased even more. Technically
though, a break to the upside should see more buyers piling in and lead to a
rally into the highs, while a break to the downside is likely to trigger
another selloff as the sellers will look to close the gap and target a break
below the $83 support.
Upcoming Events
This week the market is likely to focus on the US CPI
report as that’s what might change the expectations around the next FOMC rate
decision. Today, we will see the US PPI data and later in the day the FOMC
Meeting Minutes. Tomorrow, it will be the time for the US CPI report, and at
the same time we will also get the latest Jobless Claims figures. On Friday we conclude
the week with the University of Michigan Consumer Sentiment report. Crude Oil
is likely to react more to elevated Core CPI figures as they might lead to more
Fed tightening or ugly Jobless Claims data as that might signal a recession on
the horizon. Moreover, the events in the Middle East are something to keep an
eye on as an escalation of the conflict comprising other Arab countries will
likely lead to a surge in Crude Oil prices.
See the video below