Oil Could See a Further Pullback

A stronger U.S. dollar triggered West Texas Intermediate crude oil to trade lower along with other commodities.  After making a top last week at $99.69 a barrel, price action has reversed and currently breaking down below a long-term uptrend support level.

Last week, there were bullish indications from news that Iran was closer to having a nuclear weapon, the aggregate of crude, gasoline and distillate inventories fell by 4.25 million barrels, and the delaying of the decision of the path of the Keystone pipeline.  The headlines helped oil break out above the $95.00 resistance level.  Price has since lacked the upside momentum to reach the psychological resistance $100 level and break past the 61.8% Fibonacci level of the May high to October low move.  The current pullback could potentially see further downside momentum if we see a close below $97.50.  The next level of support would come from the 200 –day simple moving average which is currently near $95.33 area (When resistance becomes support).  If the U.S. dollar has a major rally($1,30 against the euro), a test of the $90 level could easily occur.  If the bearish correction is short-lived, a daily close above $101.00 could see upside to the $106 price region.

 

Edward J. Moya is the Chief Market Strategist for edmoya.com, an educational website for foreign exchange and commodity traders. He has over 15 years of investment industry experience in forex, stocks, options and futures. At edmoya.com, Mr. Moya writes daily currency and commodity analysis and has authored numerous articles on trading using both technical and fundamental analysis for major financial publications. He is a contributor of technical and fundamental analysis in currencies and commodities to SFO, Market News International, and Forex Factory.

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