Crude Oil Prices for the Week of May 28, 2012, Technical
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The Light Sweet Crude markets had a volatile week over the last five sessions as the macroeconomic reasons continue to shift rapidly in this commodity. The conventional wisdom is that the Middle East situation (read: Iran) was adding about $15 Dollars premium to the market price.
The tensions between the Iranians and the West have started to subside, and there is even talk of inspectors being allowed back into the country in the near future. This brings a little of the concern about military action out of the markets, and this will drive the price down. On top of this, there has also been a strong rally in the value of the US dollar, and as the oil markets are priced in those Dollars, it drives the value of Light Sweet Crude down.
The demand for energy is slumping as well, and the emerging markets may be the one bright spot at the moment. However, a country like Indonesia is no replacement for a region with the industrial demand of Europe. Because of this, there will continue to be bearish pressure in this market until the demand itself picks up. In many ways, the higher prices over the last couple of months have been artificial and needed to come back down to reality.
The $90 level has held as support, and we think that the level is going to be crucial for this commodity. The level is the site of previous resistance on several occasions, and is also the level of a major “round number”, something that always seems to attract traders in this highly technical market.
The market looks very bearish lately, and the week produced a doji-like candle. The close was negative, but shows the resilience of the $90 level. The trade set up then becomes fairly straight forward for us: sell a daily close sub-$90, of let a pop higher go, as we think rallies can be faded on weak daily candles. The market needs to spend a couple of sessions above the $100 for us to feel comfortable owning crude at the moment.
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Christopher is a part of the FXEmpire.com analysis team. He writes Forex and Commodities technical analyses on daily and weekly basis. Christopher writes his analyses in a professional and yet simple to understand manner. His analyses are available in both text and videos.
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