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James Hyerczyk
WTI Crude Oil

U.S. West Texas Intermediate crude oil futures are trading marginally lower after clawing back earlier losses on Tuesday. The early break confirmed Monday’s closing price reversal top. The chart pattern doesn’t mean the trend is changing to down, but it could lead to a 2 to 3 day correction or a 50% pullback of the short-term rally.

At 13:19 GMT, July WTI crude oil is trading $38.02, down $0.17 or -0.45%.

Traders are blaming a stronger U.S. Dollar for driving down demand for dollar-denominated crude oil. Oversupply after it was announced that a trio of Gulf producers would end voluntary output cuts was also cited as a reason for the increased selling pressure.

In other news, at 20:30 GMT, the American Petroleum institute will release its weekly inventories report. Traders will be focusing on the gasoline and distillate numbers since they best reflect demand.

Early guesses show that traders expect U.S. crude oil and gasoline inventories to have fallen by 1.5 million barrels and about 100,000 barrels respectively in the week to June 5. However, distillate inventories, which include diesel and heating oil, were seen rising by 2.9 million barrels.

Daily July WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has shifted to the downside with the formation and confirmation of the closing price reversal top on Monday.

A trade through $40.44 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through the last swing bottom at $31.14.

The main range is $54.86 to $17.27. The market is currently trading inside its retracement zone at $36.07 to $40.50. Trader reaction to this levels will likely determine the longer-term direction of the market.

The short-term range is $31.14 to $40.44. Its retracement zone at $35.79 to $34.69 is the second potential downside target.

Combining the two retracement zones creates a possible support cluster at $36.07 to $35.79. Since the main trend is up, we could see a technical bounce on the first test of this area.


Daily Swing Chart Technical Forecast

The early price action suggests the direction of the market the rest of the session on Tuesday is likely to be determined by trader reaction to a minor pivot at $38.76.

Bullish Scenario

A sustained move over $38.76 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible retest of $40.44 to $40.50.

Bearish Scenario

A sustained move under $38.76 will signal the presence of sellers. This could trigger an eventual test of a series of potential support levels at $36.07, $35.79 and $34.69.

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