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
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
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
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.
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