USOil down nearly 1% from 37-mth high


WTI benchmark futures are down 0.7% at $63.84, earlier logging a two-session low at $63.75. This is the first down day since January 5th, and only the fourth down day in the last month. The correction comes amid a broader bounce in the dollar, as speculative long positions in EURUSD ran for cover amid reports that the German coalition talks are faltering. Speculative positioning in crude futures have been at record highs, so there has been for some time built-up potential for a sharp pullback, despite an ongoing overwhelmingly bullish narrative in the market.

Despite the weakness seen today, the asset has been in an uptrend for 4 consecutive weeks. It is very well supported by the 50-period MA in the 4-hour chart, while is seen forming continuously highs and lows , but remaining in the upper Bollinger Bands pattern, the last 4-weeks. Hence today’s weakness could be consider as another swing low, with USoil being in a corrective mode. The future is currently traded at upper $64s, with next immediate short-term support at $63.70 ( resistance level for 3 consecutive days).

Meanwhile , the intra-day momentum indicators are mixed, pointing down a decrease on the upside momentum in short-term. The MACD remains positive, however RSI and Stochastic have been turned below overbought territory and towards neutral. Therefore with the asset traded below 10, 20 and 50-period MAs, intra-day a break  below the $63.70 support, could trigger a possible move lower down to the next strong support level at 50-period EMA at $63.00. 

However, if  USoil holds above the support at  $63.70, then this should be a signal that bulls are in the major control and that this weakness was simply a correction of the uptrend seen the last 4-weeks. This consider be a strong scenario, since in a longer time frame, the USoil remains at record highs, with Daily Upper Bollinger Bands being extended and Daily momentum indicators configurated positive. The MACD is at 1.92, RSI is moving in the overbought territory at 74, while Stochastic is at 90s area since December 26.

Hence, in long-term view, the USoil  remains in a bullish trend since December, along with no sign of reversal so far, considering we will not see any break of the future below the 20-DAY MA at $61.00. In the uptrend, the next resistance comes at the 50% retracement since 2014, at $67.00. A closing today above $63, could triggered a retest of the $65 area.


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Andria Pichidi

Market Analyst


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