Crude Oil Price Update – Correction Likely to Start on Sustained Move Under $39.36Trader reaction to the minor pivot at $39.36 and the major Fibonacci level at $41.56 will set the near-term tone.
U.S. West Texas Intermediate crude oil futures closed on their high on Thursday as traders reacted to better than expected U.S. Non-Farm Payrolls and a drop in the unemployment rate, while showing little reaction to a rise in weekly unemployment claims and soaring COVID-19 cases. Prices were also supported by a drop in U.S. crude oil inventories reported earlier in the week.
On Thursday, August WTI crude oil settled at $40.65. For the week, the U.S. benchmark was up 4.7%.
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The non-farm payrolls data represents the past while weekly unemployment claims are the future. Currently, the market is being supported by the easing of restrictions on travel and business which is raising hopes for future demand. A second-wave of coronavirus, however, will dampen these hopes, and likely put a lid on prices.
If states start to enforce new restrictions or lockdowns then prices are likely to retreat since this should lead to a drop in demand for gasoline and distillates.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $41.63 will signal a resumption of the uptrend. A move through $37.08 will change the main trend to down.
The minor range is $41.63 to $37.08. Its 50% level or pivot at $39.36 is controlling the near-term direction of the market. Closing above this level makes it support.
The short-term range is $34.66 to $41.63. Its 50% level at $38.15 is also support.
The intermediate range is $31.63 to $41.63. Its retracement zone at $36.63 to $35.45 is also support.
The major long-term resistance is the Fibonacci level at $41.56.
We’re going to be watching trader reaction to the minor pivot at $39.36 and the major Fibonacci level at $41.56 on Monday since they are likely to determine the next move in the market.
Taking out $39.36 will be a sign of weakness. However, due to the series of 50% retracement levels at $38.15, $37.50 and $36.63, we’re likely to see a labored break.
On the upside, however, taking out $41.56 will conviction and sustaining the move is likely to trigger an acceleration to the upside.