Analys från DailyFX
WTI Crude Oil Price Forecast: Strong Bounce Looks Constructive
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Talking Points:
- Crude Oil Technical Strategy: Rally May Run On Due To Light Volume
- 50% Fibonacci Retracement Looks To Be A Natural Reversal Point
- Sentimental Trading System Is Beginning To Flash Buy Signals
Access Our Free Q3 Oil Outlook As Oil’s Best Quarter Looks For Confirmation
After last week’s strong move higher in the price of WTI Crude Oil (CFD: USOIL), the price of Oil is higher Year on Year. The fundamental catalyst for the Bullish move in Oil was initially the announcement by Saudi Arabia’s Oil Minister that there might be discussions next month in Algiers to support prices, which was read as a potential production cut. On Monday, Oil continued to advance more than 100%, and now traders have their sets on new, more bullish targets.
Track short-term Crude Oil price levels and patterns with the GSI indicator!
With the price of Oil above $45/bbl for the first time in threeweeks, institutional speculators are getting in on the move. Hedge funds have taken a Bullish stance on WTI per futures positioning according to the CFTC. The shift to long positions by institutional money managers increased to their highest amount since January right before the last strong move higher from the high-$20/bbl zone to the low $50/bbl.
Crude Oil Price Chart Rises Toward Well Identified Resistance
The chart above has done a fine job of framing price action in WTI Crude Oil. After failing at the topchannel in June, the price quickly dropped down to a pre-identified zone provided by the median line and the Fibonacci Retracement levels in focus between $41.85-$35.22/bbl. As you can see now, we’ve bounced through an internal trend-line that may show there is more strength to come.
If the price of WTI Crude Oil closes above $46/bbl this week, the daily chart patterns will have formed a Bullish breakout from a Bear Flag. Such developments tend to have followed through, and we could see a follow through up to the 100-WMA (notpictured) all the way up ~$49.77.
Given the light volume of mid-August, it’s often folly to fight quick moves even though true breakouts have less participation. Furthermore, a rather weak Dollar is not standing in the way of Oil advancing further.
Bottom Line:
The recent price action in Crude Oil has been encouraging. The 5%+ rise in the price of Oil last week was the largest move in three months and has naturally aligned with the risk-on narrative of breakouts in equities and a rather sanguine US Dollar.
The Rebalancing rumors have served their purpose, and now the market will likely look for confirmation, which has been less reliable. One encouraging component is that Iran has lifted their production to a pre-determined level, which provides more credibility to the idea that they may join the productionfreeze agreement if one arises.
Contrarian System Beginning To Favor Upside Risk as of 8/15/16
In addition to the technical focus, we should keep an eye on retail sentiment. The upsideis beginning to alignwith our Speculative Sentiment Index or SSIfor now.
As of mid-day Monday, The ratio of long to short positions in the USOil stands at -1.05 as 49% of traders are long. Yesterday the ratio was 1.22; 55% of open positions were long. Long positions are 27.2% lower than yesterday and 49.3% below levels seen last week. Short positions are 7.1% lower than yesterday and 21.9% above levels seen last week. Open interest is 18.2% lower than yesterday and 14.5% below its monthly average.
We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives asignal that the USOil may continue higher. The trading crowd has flipped from net-long to net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.
Key Levels Over the Next 48-hrs of Trading As of August 15, 2016
T.Y.
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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