Fundamental Overview
After the breakout of the 2-month long range, crude oil has been squeezing higher with an almost 10% rally. The catalyst for the move higher since Friday has been attributed to tougher US sanctions on Russian crude on expected supply disruptions.
The market has been also supported by positive macro factors as the economic activity accelerated due to global central bank easing and expectations of Trump’s pro-growth policies. There’s some angst around inflation now with the Fed waiting for further progress to keep cutting rates.
In the current context, the market might not like negative news on inflation as that could kick off some risk off sentiment, further tightening in financial conditions and weigh on growth and therefore on crude oil.
Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that crude oil broke above the major trendline yesterday as the price continues to squeeze higher. We have a potential resistance level around the 80.00 handle. That’s where we can expect the sellers to step in with a defined risk above the level to position for a pullback into the 75.00 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 84.50 level next.
Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have now an upward trendline defining the bullish momentum on this timeframe. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline to position for further upside. The sellers, on the other hand, will look for a break lower to target new lows.
Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a potential support zone around the 77.00 level where we can find the most recent higher low and the broken trendline. If we get a pullback into that zone, we can expect the buyers to pile in to position for new highs, while the sellers will look for a break lower to target a drop into the next trendline around the 75.00 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the US PPI data. Tomorrow, we have the US CPI report. On Thursday, we get the latest US Jobless Claims figures.
