Analys från DailyFX
WTI Crude Oil Price Forecast: Watching For Signs of a Lower-High
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Talking Points:
- Crude Oil Technical Strategy: Oil Failing To Push Past First Key Resistance Zone at $34.25/bbl
- Strong US Dollar Further Puts Strain On Oil’s Advance Alongside China’s Contractions
- WTI Continues To Lead Risk Sentiment, Watch for Equities to Fall Should Oil Head Back Below $30
Rocky Start to the Week for Oil
The price of WTI Crude Oil has fallen early in the trading week by more than $1/bbl after investor’s optimism was tempered by Chinese manufacturing numbers that showed the second largest economy in the world, and the recent key driver in commodity demand showed its lowest reading in 3-years. On top of the Chinese data, that disappointment many, the news and hopes of a coordinated production cut by Saudi, Russia, and other producers are unwinding.
In addition, it would be wise not to underestimate how quick some investors are to book a large gain like the one Oil has seen recently. If profit booking and disappointment economic data align, alongside no production cuts, it is difficult to get hopes up that we see a sustained rally above the YTD high of $38.36 on the first trading day of the year.
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Key Levels from Here
Last note, we shared that the sharp move above $34/bbl would likely lead to unstable price action. Given today’s sharp move low of +4%, another key level worth watching is the key higher low on the chart of 29.23. The March contract pivots off that level before hitting $34.79, and if Bullish momentum is to remain at all, that price should hold as well. Some have claimed that the late January move was little more than a ‘dead cat bounce,’ this week should help resolve that issue, and we will keep an eye on last week’s high and the YTD high of $38.36 to validate the Bears view.
Sentiment Flip Warns of Further Short-Term Upside
In addition to the fundamental and technical pressure that Oil still has on its back, the bearish view aligns with our Speculative Sentiment Index or SSI. Our internal readings of Oil are showing an SSI reading of 1.2096. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are now bullish provides a signal that US Oil may continue lower, and attempt to break the support levels mentioned above. If the reading were to turn negative again, and price broke back above $34.78bbl, we could begin looking for a retest of the YTD high of $38.36.
Sentiment extremes unwinding look to be the likely reason for the aggressive rally and recent volatility starting late last week as Oil bears took their profitable trades off the table. However, now the short-term Oil Bulls could be taking their profits as well, especially since the fundamental picture has not become much rosier since the 20%+ rally ended.
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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