Crude Oil Technical Preview 2015-03-05
Crude oil shrugs off massive inventory build up.
Crude Oil prices have been choppy for the past few weeks ranging between the 50 – 51 and 48 – 49 levels. For the most part, prices seems to be stable for the moment, which should provide some respite for inflation data across the major economies, especially on the headline.
In the longer term charts, the daily crude oil prices shows a retest down to 48.99 levels, which we have pointed in our past week technical analysis for Crude Oil. The ranging price action is likely to see a break out with the bias to the upside. A break above the previous higher at 54.01 which comes just below the major resistance level at 55.35 is needed to ensure further gains.
A successful break out from 54 would see price eventually correct itself towards the broken support level between 66 and 63.5 levels. An alternate scenario is the potential for a breakdown of prices as the bearish trend resumes. For this to be valid we will need to see a break below the established support at 48.99 through 48, which will then see a drop to 44.35 through 43.58.
The Daily chart for crude oil shows the current price action as well as the two potential scenarios that could play out.
Switching to the 4- hour charts, as noted in our last week’s analysis price broke out from the triangle pattern, albeit choppy but eventually managed to lift off from the main support at 49.69 levels. Price action currently looks poised to test the 52.41 short term resistance level, followed by a test back to 53.69 levels. If you look carefully at the chart price has been bouncing back and forth between the highs of 53.7 and 47.81. We expect that Crude oil has formed a solid base near the 47.81 support level followed by 49.7, which should help push prices higher to test 53.7 and potentially break out above this support level.
Yesterday’s data released by the Department of Energy showed that Crude oil inventories rose to its highest levels in 14 years, rising 10.3 million barrels above estimates of 4 million. While Crude oil initially reacted to the news, the fact remains that the data was shrugged off as prices continued to tread higher.
The major risk to Crude oil prices comes from the strength of the US Dollar, which is already trading near multi year highs but shy of a major resistance level. We notice the fading bullish momentum in the Dollar Index and in this aspect any declines in the Dollar Index is likely to give some additional boost to Crude oil prices as well. Keep an eye out on tomorrow’s US jobs reports which could possibly set the direction for the Dollar Index in the near term as the Greenback trades within a tight range near the highs.
To conclude, Crude could possibly test the highs to 52.5 and eventually towards 53.7 in the near term.