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James Hyerczyk
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WTI Crude Oil

U.S. West Texas Intermediate crude oil futures finished lower on Wednesday as a surge in the U.S. Dollar encouraged foreign investors to take profits in the dollar-denominated commodity despite another drop in U.S. crude stockpiles and encouraging signs of increasing demand.

After touching a more than 2-year high early in the session, prices closed lower for the session, producing a technical closing price reversal top, a chart pattern that often signals the selling is greater than the buying at current price levels.

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At 0:40 GMT, September WTI crude oil futures are trading $70.68, down $0.59 or -0.83%.

Prices surged shortly after the regular session opening on Wednesday when the Energy Information Administration (EIA) reported U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest levels since January 2020, signaling continued improvement in demand.

The selling pressure started when the dollar jumped against a basket of currencies on Wednesday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023. A stronger U.S. Dollar tends to reduce foreign demand of crude oil, which is priced in dollars.

Daily September WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, the confirmation of yesterday’s closing price reversal top shifted momentum to the downside. This could trigger the start of a 2 to 3 day correction.

A trade through $71.99 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through the nearest main bottom at $61.06.

The minor trend is also up. A trade through $68.05 will change the minor trend to down. This will confirm the shift in momentum.

The first minor range is $68.05 to $71.99. Its 50% level at $70.02 is the first downside target. The second minor range is $67.84 to $71.99. Its 50% level at $69.92 is another target.

A third minor range is $64.60 to $71.99. Its 50% level at $68.29 is the last potential support before the two minor bottoms.

The short-term range is $61.06 to $71.99. If the minor trend changes to down then look for the selling pressure to possibly extend into its retracement zone at $66.53 to $65.24.

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Daily Swing Chart Technical Forecast

The direction of the September WTI crude oil market on Thursday is likely to be determined by trader reaction to $70.75.

Bearish Scenario

A sustained move over $70.75 will indicate the presence of sellers. This could lead to a test of $70.02. Watch for a technical bounce on the first test of this level. If it fails then look for the selling to possibly extend into a minor price cluster at $68.29, $68.05 and $67.84.

Bullish Scenario

A sustained move over $70.75 will signal the return of buyers. The first target is a pivot at $71.23. This is followed by the closing price reversal top at $71.99. This is a potential trigger point for an acceleration to the upside.

For a look at all of today’s economic events, check out our economic calendar.
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