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Crude Oil Price Update – Strong Greenback Weighs on Dollar-Denominated Oil

By:
James Hyerczyk
Updated: Dec 6, 2022, 07:31 UTC

Uncertainty over Fed policy drove the U.S. Dollar higher, weighing on dollar-denominated commodities like crude oil and gold.

WTI Crude Oil

In this article:

U.S. West Texas Intermediate crude oil futures closed sharply lower on Monday after support for higher risk assets fell as the U.S. Dollar regained its strength. The catalysts behind the move were worries that the Federal Reserve could continue its aggressive policy tightening path following the release of stronger-than-expected U.S. services sector data.

On Monday, January WTI crude oil futures settled at $76.93, down $3.05 or -3.81%. The United States Oil Fund ETF (USO) finished at $67.70, down $2.14 or -3.06%.

U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year. The news drove the U.S. Dollar higher, weighing on dollar-denominated commodities like crude oil and gold.

In other news, sellers showed a delayed reaction to the news that OPEC+ agreed over the weekend to leave production at current levels. The EU ban on Russian oil also began on Monday. Traders are confused over how it is going to work so I believe it had limited influence on prices on the first day.

Daily January WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $83.34 will change the main trend to up. A move through $73.60 will signal a resumption of the downtrend.

The nearest resistance is a Fibonacci level at $78.72, followed by a pair of 50% levels at $83.07 and $84.43. The nearest support is a 50% level at $72.31.

For longer-term traders, the key support zone is $72.31 to $78.72.

The minor range is $73.60 to $83.34. The market is currently straddling its pivot at $77.32.

Daily Swing Chart Technical Forecast

Trader reaction to $77.32 is likely to determine the direction of the January WTI crude oil market on Tuesday.

Bearish Scenario

A sustained move under $77.32 will indicate the presence of sellers. If this move creates enough downside momentum then look for the selling to possibly extend into the main bottom at $73.60, followed by the main 50% level at $72.31.

Bullish Scenario

A sustained move over $77.32 will signal the presence of buyers. The first target is $78.72. This is a potential trigger point for an acceleration to the upside with the resistance cluster at $83.07 – $83.34 the key upside target.

Overtaking $83.34 will change the main trend to up.

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

About the Author

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.

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