Basic overview
Despite OPEC+'s recent extension of voluntary production cuts, crude oil was sold off as the price broke support in the May range. However, the decline may only be technical as it gained bearish momentum on the breakout. The price eventually bottomed around the $73 area and erased all losses.
Recently, the market received a boost from a strong US NFP report, showing that demand is likely to remain strong amid a rebound in global growth as also indicated by the PMIs. Moreover, some major central banks have begun to ease their policies, and China is likely to continue to do so, as deflationary forces still exist.
In the big picture, better growth prospects and positive risk sentiment should act as tailwinds for the market, but we will need to break through the strong resistance at $80 first to further increase bullish momentum.
Technical analysis of crude oil – daily time frame
Crude oil daily
On the daily chart, we can see that crude oil broke the strong support around 76.50 level and was sold off as momentum built up. The price bottomed around 73.00 level and eventually continued to rise after the US NFP report.
The price is now breaking the trend line which could increase the upward momentum to the key resistance level at 80. This is where we can expect sellers to step in again with risks identified above it to prepare for a drop to new lows. On the other hand, buyers will want to see the price finally rise to increase bullish bets to the 90.00 area.
Technical analysis of crude oil – 4-hour time frame
Crude oil 4 hours
On the 4-hour chart, we can see that we now have an uptrend line outlining the current bullish momentum. If we get a pullback to the trend line, we can expect buyers to rely on it with specific risks below it to place their position for a continuation of the rally and a break of the 80 resistance level.
On the other hand, sellers will want to see the price break below the trend line and the 76.85 level to regain some control and position to fall to new lows.
Technical analysis of crude oil – 1 hour time frame
Crude oil 1 hour
On the hourly chart, we can see that we also have a confluence area of the 50% Fibonacci retracement level around the trend line. This would reinforce technical support around the 77.00 area, so it will be a key area to watch if the price drops there. The red lines mark the average daily range for the day.
Upcoming stimuli
Today we will get US CPI data and the Federal Open Market Committee's interest rate decision. Tomorrow we will release the US Producer Price Index and the latest US unemployment claims numbers. On Friday, we wrap up the week with the University of Michigan Consumer Survey.