Fundamental Overview
Crude oil has been on a seesaw this week as we got a rally on Monday on the news that Libya was going to close down all oil fields and halt production and exports. That spike eventually got faded and prices even fell below the level seen before the news. Yesterday, we got the news that Iraq was going to cut production which triggered another rally in oil.
These supply side factors are driving the price action at the moment. In the bigger picture, the market has been mostly rangebound for two years as central banks tightening weighed on growth. Right now, it seems like the Fed is going to cut rates into a resilient economy which could spur economic activity. If they really manage to pull out a soft landing, it should support the crude oil prices.
Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that crude oil has been mostly rangebound between the 72.50 support and the 80.00 resistance. The market participants will likely keep on “playing the range” by buying at support and selling at resistance until we get a breakout.
Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong trendline defining the bearish bias. We can expect the sellers to lean on it with a defined risk above it to position for a drop into the 72.50 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 80 handle.
Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we got a strong rally yesterday on the news of the production cut by Iraq. The price retested a minor support zone and bounced to rally back into the recent high. If we get a break above the 76.90 high, we can expect the bullish momentum to increase as more buyers will pile in for a rally into the major trendline.
The sellers, on the other hand, will want to see the price breaking below the 75.30 support zone to increase the bearish bets into the 72.50 support. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PCE report.