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James Hyerczyk
WTI Crude Oil

U.S. West Texas Intermediate crude oil futures are trading softer on Wednesday shortly after the regular session opening. The catalyst behind the weakness is the fear that retaliation by the United States against China for its decision to implement national security laws on Hong Kong will lead to lower demand.

At 14:09 GMT, July WTI crude oil is trading $33.21, down $1.14 or -3.32%.

On Tuesday, U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong. An escalation of tensions between the two biggest economies could ratchet up the pressure on global businesses and oil demand already weakened by the coronavirus pandemic.

In other news, European Central Bank President Christine Lagarde released a gloomy forecast for the Euro Zone economy that also weighed on crude oil sentiment. Lagarde said the Euro Zone economy is likely to shrink between 8% and 12% this year.

Later today at 20:30 GMT, traders will get the opportunity to react to the latest inventories data from the American Petroleum Institute (API). Traders are looking for a drawdown of 2.5 million barrels.

Daily July WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum is trending higher. The main trend will change to up on a trade through $35.18. A move through $17.27 will signal a resumption of the downtrend. This is highly unlikely, but there is room to the downside for a normal 50% to 61.8% retracement.

The minor trend is up. This is controlling the upside momentum. A trade through $30.72 will change the minor trend to down.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $17.27 is the primary upside target zone.

The minor range is $30.72 to $34.81. Its 50% level or pivot at $32.77 is potential support today.

The short-term range is $17.27 to $34.81. If the minor trend changes to down then look for a possible pullback into its retracement zone at $26.04 to $23.97.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $33.21, the direction of the July WTI crude oil market the rest of the session on Wednesday is likely to be determined by trader reaction to the pivot at $32.77.

Bullish Scenario

Holding above $32.77 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for a retest of $34.81.

Taking out $35.18 will change the main trend to up, but we may not see a breakout out to the upside because of the major retracement zone at $36.07.

Bearish Scenario

A sustained move under $32.77 will signal the presence of sellers. This could trigger an acceleration to the downside with $30.72 the next likely target. This price level is a potential trigger point for an acceleration to the downside since the next major target doesn’t come in until $26.04 to $23.97.

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