Crude Oil Update – Weak Dollar, Extension Talk, Lending Support

June West Texas Intermediate Crude Oil is trading higher shortly before the regular session opening. Technically oversold conditions are primarily responsible for the early strength. A weaker U.S. Dollar may also be contributing to the gains. Despite the early strength, concerns over U.S. supply could cap gains. Renewed talk of an extension of the OPEC-led plan to cut output is also helping to support prices.

Technical Analysis

The main trend is up according to the daily swing chart. The market is currently down seven sessions from the recent top at $54.14. This puts it in oversold territory so I wouldn’t be surprised by a 2 to 3 day rally. Also with the trend up, it’s likely to attract value-buyers on the weakness.

The main range is $47.58 to $54.14. Its retracement zone is $50.86 to $50.09. This zone is controlling the near-term direction of the market. Shortly before the opening, crude oil is straddling the lower or Fibonacci level at $50.09.

If a short-term range forms between $54.14 and $49.20 then we could see an eventual retracement back to $51.67 to $52.25.

Forecast

Based on the current price at $50.03, the direction of the crude oil market today is likely to be determined by trader reaction to the Fibonacci level at $50.09.

A sustained move under $50.09 will signal the presence of sellers. If above average selling volume hits the market, we could see a pullback into last week’s low at $49.20, followed by an uptrending angle at $48.96.

Overtaking the Fib level at $50.09 will signal the presence of buyers. This could trigger a labored rally with three targets lined up at $50.09, $50.64 and $50.86.

The 50% level at $50.86 is the trigger point for an acceleration to the upside.

Watch the price action and read the order flow at $50.09 today. Trader reaction to this price will tell us if the buyers are retaking control.