Sellers are focusing primarily on the Fed’s aggressive 75-basis-point rate hike, a plunge in equity prices and fears of a possible global recession.
U.S. West Texas Intermediate crude oil futures are edging lower on Friday as interest rate hikes from major central banks are fueling worries about a sharp economic slowdown that could lead to a drop in demand. Today’s weakness is also solidifying the chances of its first weekly decline in eight weeks.
At 12:47 GMT, August WTI crude oil futures are trading $114.60, down $0.65 or -0.56%. On Thursday, the United States Oil Fund ETF (USO) settled at $87.67, up $0.74 or +0.85%.
Worries over tight supply took a back seat this week with traders focusing primarily on the Fed’s aggressive 75-basis-point rate hike, a huge drop in equity prices and fears of a possible global recession.
The price action suggests investors may be getting distracted by rising interest rates and inflation, which may lead to a shift in the focus for traders from tight supplies to affordability.
The main trend is up according to the daily swing chart. However, momentum is trending lower.
A trade through $100.66 will change the main trend to down. A move through $120.88 will signal a resumption of the uptrend.
The minor trend is down. This is controlling the momentum. A trade through $110.43 will reaffirm the downtrend.
The minor range is $120.88 to $110.43. Its retracement zone at $115.66 to $116.89 is resistance. This area stopped the buying earlier today at $116.58.
The short-term range is $100.66 to $120.88. Its retracement zone at $110.77 to $108.38 is support. This area stopped the selling at $110.43 on Thursday.
Trader reaction to $115.66 to $116.89 is likely to determine the direction of the August WTI crude oil market on Friday.
A sustained move under the minor 50% level at $115.66 will indicate the presence of sellers. The first downside target is a minor pivot at $113.50. If this level fails as support then look for the selling to possibly extend into $110.77 to $108.38.
A sustained move over $115.66 will signal the presence of buyers. Overtaking the Fibonacci level at $116.89 will indicate the buying is getting stronger. If this move creates enough upside momentum then look for the rally to possibly extend into $120.88 over the near-term.
The market is starting to look a little bearish. The first sign of weakness will be the formation of a secondary lower top at $116.58. A lower close for the week will produce a potentially bearish closing price reversal top. If confirmed, we could see the start of a 2 – 3 week correction.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.