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
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
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
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.
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