Technicals | Nov 19 2015
By Tyler Yell, CMT, forex trading instructor, FXCM
- Crude Oil Technical Strategy: Focus on Testing YTD Lows of $37.73
- Price Broke below Monday’s Bullish Candle
- Big Miss on EIA Inventories Wasn’t Able to Boost Oil Price
Today, Oil [WTI] broke below $40bbl to print the lowest price since late August. This break of $40 temporarily negates the late Monday bounce off key support and, therefore, bullish outside day. The catalyst for the recent drop was two-fold. First, the prolonged strength of the US dollar continues to put pressure on dollar-denominated commodities. Second, producers’ output swelled global inventories to a record. The stockpiles rose to 487.3 million barrels last week as per the EIA data today [last night Australian time], which was the highest for this time of year since 1930 per government data. As Oil inventories continue to grow, so does the disparity between abundant supply and reduced demand.
Price continues to travel within the price range of an extreme day. Today, the low in Crude Oil was $39.89, which remains within the August 24th range of $40.45 and the YTD low in oil (and many other assets) of $37.73. Price did attempt a rally off the lows late in the session due to a weakening USD on the uncertainty of the Fed minutes that still left the door open for a no-hike in December that could weaken the USD and prop up commodities. Today’s low of also aligned with a key level as per Fibonacci ratio analysis of the Fibonacci Expansion from October & November extremes on WTI / Crude Oil at 40.00. The short-term resistance of $42.22, which is the opening range high for the week. This resistance is followed closely by $42.57, the October 27th low followed by $43.11, the 38.2% Fibonacci resistance level of the November range.
The US Dollar would need to turn aggressively lower to give Oil bulls a ray of light given the imbalance of supply to demand. Therefore, a hold above key support on US Dollar would likely continue keep US Oil around the $40 handle or lower. Focal levels of support currently sit around Pivot support of $38.92 followed by a retest of the August low of $37.73.
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