Although Global growth seems to be more and more in peril as the economic data of the biggest economies in the world keep on deteriorating, Crude Oil is finding strength from the supply side as OPEC+ tries to maintain prices above the 70$ level and some are speculating that they want prices somewhere around the $100 level. Just yesterday, Crude Oil spiked as Saudi Arabia extended its voluntary output cut through December, although the market has already been trading into such decision in the past weeks. Overall, it looks like at the moment Crude Oil might be supported, but higher energy prices now that the global economy is fragile, might squeeze the demand even more and eventually lead to a selloff as the economies fall into recession.
WTI Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that Crude Oil broke out of the key $83 resistance again and this time the price extended to new highs. This impulse was very strong and fast making the whole move overstretched. In fact, we can see that the price is very far from the blue 8 moving average and in such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
We can also notice that the latest leg higher diverged with the MACD which is usually a sign of weakening momentum often followed by pullbacks or reversals. From a risk management perspective, the buyers would be better off waiting for the price to pull back into the trendline and the previous resistance turned support before piling in and target the $93 level.
WTI Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the Fibonacci retracement levels around the support zone and the trendline. This will likely be a strong buying area, so the sellers will need to have patience and wait for the price to break below the trendline to invalidate the bullish setup and position for another big fall into the lows.
WTI Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another divergence with the MACD, which should be another confirmation that a pullback is indeed coming. More aggressive sellers may want to pile in here with a defined risk above the high to position for a fall into the trendline.
Upcoming Events
This week is a bit empty on the data front with just the US ISM Services PMI today and the US Jobless Claims tomorrow being the main highlights. If we see strong data, the market is unlikely to price an imminent recession and thus it shouldn’t affect Crude Oil too much. On the other hand, weak data should bring back recessionary fears and likely trigger some risk aversion in the markets eventually weighing on Crude Oil.
See also the video below
