Crude Oil Price Update – Mid-Session Plunge Fueled by ‘Hard-Landing’ Recession Fears

U.S. West Texas Intermediate crude oil futures are down sharply at the mid-session on Friday in a volatile session. Triggering the selling and erasing earlier gains is a stronger U.S. Dollar, which made the commodity more expensive for foreign buyers.

The catalyst behind the rise in the dollar is a surge in U.S. Treasury yields and concerns about higher interest rates after the release of a stronger-than-expected U.S. labor market report.

At 17:30 GMT, March WTI crude oil futures are trading $73.26, down $2.62 or -3.45%. The United States Oil Fund ETF (USO) is at $64.41, down $2.16 or -3.25%.

Financial futures traders are now pricing in more rate hikes from the Fed, perhaps into June and higher than 5.0%. This is raising fears about a recession that would lead to lower demand for crude oil. Ahead of the jobs report, traders were betting on the Fed orchestrating a “soft-landing”. Now they are pricing in a “hard-landing”.

Crude oil traders are basically following the old adage, “When in doubt, get out.”

Daily March WTI Crude Oil Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through $72.74 will change the main trend to down. A move through $82.66 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through $78.00 will change the minor trend to up.

The nearest resistance is a series of retracement levels at $75.18, $76.61 and $77.70. The closest support is a long-term 50% level at $70.21.

Daily March WTI Crude Oil Technical Forecast

Trader reaction to the short-term Fibonacci level at $75.18 is likely to determine the direction of March WTI crude oil into the close on Friday.

Bearish Scenario

A sustained move under $75.18 will indicate the presence of sellers. If this continues to generate enough downside momentum into the close then look for sellers to make a run at the main bottom at $72.74.

Taking out $72.74 will change the main trend to down and could trigger an acceleration into the main bottom at $70.56, followed by the major 50% level at $70.21.

Bullish Scenario

Overtaking $75.18 will likely indicate late session profit-taking or short-covering. This is likely to be a labored event with $76.61 and $77.70 providing resistance.