The summer rally in Crude Oil seems to be coming to an end as the sentiment turns sour due to the weakening global economy and the expectations of a big stimulus from China waning. In fact, despite the very weak economic data and an ailing economy, the PBoC delivered small rate cuts and even refrained to cut rates on some key benchmarks. It’s getting more and more clear that we won’t see anything big coming from China and the weakness in its economy is likely to spread across the globe.
WTI Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that Crude Oil peeked above the key $83 resistance but sold off soon after as the economic problems in China weighed on the sentiment. The moving averages are now crossed again to the downside, which is a bad omen for the buyers. We can see that the sellers leant on the red 21 moving average as the price retested the moving average after the breakout and we are now consolidating around the $80 level awaiting a catalyst.
WTI Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that Crude Oil has also breached the upward trendline that was defining the uptrend into the $83 resistance. This is another bad signal for the buyers and an extra confirmation for the sellers that the trend might be turning. We can see that the price has recently bounced from a previous swing low around the $79 level, but the sellers came into the market again around the $82 level. We have now created a small range between the $79 support and the $82 resistance and a break on either side should lead to a more sustained move as momentum traders are likely to pile in.
WTI Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the range between the $79 support and the $82 resistance. The buyers might want to lean on the support with a defined risk below the level to target a break above the resistance. On the other hand, if the price comes back to the resistance, the sellers are likely to pile in with a defined risk above the level to target a break below the support.
Upcoming Events
This week is pretty empty on the economic data side as we will only have the PMIs today and the US Jobless Claims tomorrow. If the data surprises to the upside we might see some strength in Crude Oil in the short term, but the prospects of more rate hikes might drive it down soon after. On the other hand, weak data should weigh on Crude Oil as global growth is already fragile with the economic problems in China and weakness in the other major economies is not going to help. Remember also that this is the Jackson Hole Symposium week, so we will hear from many central bankers including Fed Chair Powell, who is set to speak on Friday.
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