Talking Points:
- Crude Oil Technical Strategy: Price trend support (50/52) in focus on recent breakdown
- Dollar strength likely adding to worries alongside possible over-production
U.S. Crude Oil inventories are showing that Shale Oil production is taking the opportunity of a willing cut in production by OPEC. On Wednesday, Government data in the U.S. showed a surprising +8.21 million barrels to 528.4 million barrels, the highest in weekly data going back to 1982 per Bloomberg and the highest production amount in over a year, which aligns with the increase in Oil Rigs per Baker Hughes.
In addition to rising supplies in the US, which become increasingly dependent on a bump in demand to keep the price stable, Oil traders are also watching the USD. We continue to see the greenback sit atop the G8FX Strong/Weak ranking due to anticipated action from the Federal Reserve in 2017. A continue appreciation of USD could further strain demand for Oil, which would likely increase price pressure given the rise in Shale Production.
Interested in Joining Our Analysts, Instructors, or Strategists For a Free Webinar? Register Here
CRUDE OIL TECHNICAL ANALYSIS – For much of 2017, the price of Crude Oil has oscillated above $50/bbl. Despite the tug-of-war between US producers and OPEC, Crude oil prices remain stuck in a narrow range of $55/50, but the longer-term structure appears trend continuation. While there was excitement on the recent run to $55/bbl, it now appears we are tracing out a larger bullish Triangle chart formation than previously anticipated that could take weeks, if not months to complete.
Others are viewing this as a longer-term topping pattern before a new attempt at $20/bbl, though I do not take that view.The invalidation of the larger Bullish Triangle would be a close below $50.75/bbl.
We will continue to favor the patient-longer-term Bullish view absent a close below Triangle support. A daily close above the 55.21-65 area (January 3 high, 38.2% Fibonacci expansion) targets the 50% level at 57.18 and quite possibly, higher. Wednesday’s drop will likely pull-out value buyers as we’re now trading at the bottom of a multi-month range. However, a breakdown here will turn the focus on the 50% retracement of the November-January range that aligns with the 200-DMA at $48.72/bbl.
Are commodity prices matching DailyFX forecasts so far in 2017? Find out here!
Chart created using TradingView
— Written by Tyler Yell, CMT, Currency Analyst Trading Instructor for DailyFX.com
Key LevelsOver the Next 48-hrs of Trading as ofWednesday, March 8, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.
Contact and follow Tyler on Twitter: @ForexYell