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
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
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
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.
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