Crude Oil Update – Prices Supported by Weaker Dollar and Saudi Comments

March West Texas Intermediate Crude Oil futures are trading higher on Tuesday in response to a plunge by the U.S. Dollar and optimistic comments from Saudi Arabia.

The dollar fell against most major currencies after U.S. President-elect Donald Trump said that the strong Greenback was hurting U.S. competitiveness in foreign markets especially China.

Prices were boosted after Saudi Arabia said it would adhere strictly to its commitment to cut output under its agreement with OPEC/non-OPEC countries.

Gains could be capped due to skepticism over whether the deal to reduce production will be enough to trim supply and stabilize prices given increased U.S. production and expectations for lower global demand.

Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through $54.29 will change the minor trend to up.

The main range is $56.18 to $51.59. Its retracement zone at $53.89 to $54.43 is the primary upside target. The lower or 50% level of this range at $53.89 is currently being tested. Trader reaction to this zone is likely to determine the near-term trend of the market.

The short-term range is $51.59 to $54.29. Its retracement zone at $52.94 to $52.62 is the primary downside target. The upper or 50% level of this range at $52.94 provided support on Monday.

Forecast

Based on the current price at $53.86, the direction of the market the rest of the session is likely to be determined by trader reaction to the 50% level at $53.89.

A sustained move over $53.89 will indicate the presence of buyers. This is followed by an uptrending angle at $54.09 and a Fibonacci level at $54.43.

The Fib level at $54.43 is the trigger point for a possible acceleration to the upside with the first target angle coming in at $54.93.

If the intraday rally fails at $53.89 then look for prices to retreat with the next target angle coming in at $53.68. Taking out this angle could lead to a steep break into the support cluster at $52.94 to $52.84.

Watch the price action and read the order flow at $53.89 the rest of the session. Trader reaction to this price level will tell us if the bulls or the bears are in control.