Crude Oil Price Update – Trader Reaction to $66.35 – $64.05 Retracement Zone Determines Near-Term Direction

U.S. West Texas Intermediate crude oil futures are trading sharply lower on Monday as long traders exit positions due to fear of the unknown as demand concerns rise over new coronavirus-related restrictions in Asia. Meanwhile a surge in the U.S. Dollar, sparked by Friday’s robust labor market report, could dampen foreign demand for the dollar-denominated commodity.

At 12:07 GMT, September WTI crude oil futures are trading $2.49 or -3.65%.

Traders are particularly worried about demand destruction in China as aggressive restrictions could slow a global recovery in fuel demand.

ANZ analysts pointed to new restrictions in China, the world’s second-largest oil consumer, as a major factor clouding the outlook for demand growth.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $65.01 will reaffirm the downtrend with $61.06 the next target. A move through $74.23 will change the main trend to up.

The minor trend is also down. A trade through $70.18 will change the minor trend to up. This will shift momentum to the upside.

The main range is $56.62 to $76.07. The market is currently trading inside its retracement zone at $66.35 to $64.05. This zone stopped the selling on July 20 at $65.01.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the September WTI crude oil market on Monday will be determined by trader reaction to $66.35.

Bearish Scenario

A sustained move under $66.35 will indicate the presence of sellers. The first downside target is $65.01, followed by the Fibonacci level at $64.05.

Look for a technical bounce on the first test of $64.05, but if it fails then be prepared for an acceleration into the May 21 bottom at $61.06.

Bullish Scenario

A sustained move over $66.35 will signal the presence of buyers. If this move creates enough upside momentum we could see a drive into the minor top at $70.18 over the short-run.

Side Notes

Tuesday will be the seventh day down from the last main top at $74.23. This will put the market inside the window of time for a potentially bullish closing price reversal bottom.