Crude Oil Technical Analysis - The market needs the Fed's help

Fundamental Overview

Crude oil found some support from Powell’s dovish tilt but eventually couldn’t break above some key resistance levels and wiped out all the gains. The focus has now switched to the NFP report due next week as that’s going to influence interest rates expectations and the Fed’s stance.

If we get strong data, we might see some short term weakness as the hawkish repricing weighs on growth expectations, but if the Fed speakers maintain their easing bias, then we could see crude oil breaking out into new highs and likely extended the gains into the 70.00 price area on expected higher demand.

Soft data, on the other hand, could be bearish in the short-term but as the market increases the dovish bets and the Fed eases, it should eventually support the market.

Crude Oil Technical Analysis – Daily Timeframe

On the daily chart, we can see that crude oil probed above the key resistance zone around the 64.00 handle before falling back below it as the price rejected the major downward trendline. The sellers will likely continue to pile in around these levels with a defined risk above the trendline to position for a drop into the 59.77 level. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and start targeting the 70.00 handle next.

Crude Oil Technical Analysis – 4 hour Timeframe

On the 4 hour chart, there’s not much we can glean from this timeframe, so we need to zoom in to see some more details.

Crude Oil Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a minor downward trendline defining the bearish momentum. The sellers will likely continue to lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to position for a rally into the major trendline targeting a breakout. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PCE price index.