USOIL, H1
Saudi Arabia is considering rising supply, with remarks from the nation’s Crown Prince affirming that his country is committed to ensuring there is adequate oil supplies. He also said that oil market fundamentals are healthy, and that OPEC, members of which plus Russia will be gathering in Vienna for a meeting on Friday, must adopt a flexible, forward-looking policy. Aside from Saudi Arabia, Russia is, by all accounts, chomping at the bit to relax the supply quota accord with global oil inventories back to near long terms average levels, strong global demand, and output shortfalls and potential output shortfalls in Venezuelan and Iranian supply.
His remarks have helped up a cap on WTI crude futures, which are presently down from the high at $65.52 and below the open price at $64.92. USOIL is currently trading at 38.2% Fibonacci retracement level at $64.80, set since Friday’s decline, while today rejected for a 2nd time the $65.50- $65.70 area. This area confluences significantly, with the 61.8% Fibonacci retracement level and the 200-period EMA in the hourly chart. Hence this reverse lower so far today, suggests that the negative bias identified since May 22, is likely to be reinforced.
Technical-wise, USoil is likely to continue being traded with lack of upside strength. The negative picture comes initially, as it is traded below 20 and 50-DAY SMA and within the lower Daily Bollinger Bands, since May 25. The Daily RSI remains below neutral zone, while MACD lines coincides with the signal line, proposing that negative momentum is likely to be held stable.
Intra-day on the other hand, the extension to the downside of the hourly lower Bollinger Bands pattern suggests that the negative momentum holds. The fact however that 20. 50 and 200-period EMA has flattened as the pair moves below them, propose that despite that negative momentum holds, we might face a short-term consolidation. Meanwhile, the technical indicators present a negative to neutral picture, as the RSI is below 50 and the MACD fluctuates around zero zone, without indication of direction yet.
Hence, taking a long-term view, USoil remains in a bearish trend, along with no sign of reversal so far, considering we will not see any break below yesterday’s low, at $64.23. In the uptrend, the next strong resistance comes at Friday’s peak, at $67.00. In the short-term, a break below $64.80, could imply that bears are trying to retest the next immediate support at $64.20. There is resistance around $65.50-$65.70 area.
Looking at the Fundamentals, the markets await comments from Powell, Draghi, and Kuroda from Sintra, Portugal, whle the USoil price is likely to be affected by the release of the US Oil Inventories later today.
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Andria Pichidi
Market Analyst
HotForex
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