The ascent of the WTI Crude Oil Futures (NYMEX: CL) has encountered a temporary barricade, relinquishing 42 basis points this week. Following an impressive seven-week surge, signs emerge that the bullish momentum might be tapering off, exemplified by the futures hitting an 18-week pinnacle, marking a pivotal swing high.
This turning point can be attributed to an unexpected surge in crude inventories over the previous week, catapulting inventories to 5.851 million, in stark contrast to the mere 0.567 million expected, erasing three consecutive weeks of drawdowns. The abrupt inventory surge underscores potential weakening demand, thereby signalling a decline in market sentiment.
Additionally, China’s lacklustre economic indicators, with retail sales, industrial production, and fixed asset investment receding in July, have placed a ceiling on the upward trajectory of the oil futures. As demand dynamics and global economic indicators interplay, the intricate web of energy markets unfolds.
Technical
WTI Crude Oil Futures continue to ride a resolute upward trajectory, characterised by its position above the 100-day moving average within an ascending channel formation. The recent price action reveals an intriguing interplay of support and resistance dynamics.
After rejecting the $80.57 per barrel (BLL) mark – a reflection of the channel’s lower trendline – the surge encountered resistance at $84.89 BLL, aligning with the ascending channel’s upper trendline. Currently, a retracement has ensued, directing the futures towards the 61.80% Fibonacci Retracement Golden Ratio level, a pivotal juncture within the ascending channel’s support.
This inflexion point holds potential significance. Should the Golden Ratio uphold its supportive role, the $84.89 BLL resistance could re-emerge as an aspirational point of interest to optimistic traders. Conversely, a breach beneath the Golden Ratio, potentially signalling bearish sentiment and a breakdown from the channel, might put the $80.57 per barrel support into the spotlight, warranting cautious observation amid evolving market sentiments.
Summary
The Golden Ratio will likely play a pivotal role in defining market sentiment for the coming days or weeks. The $84.89 BLL level will likely serve as a level of significance to the upside, while the $80.57 BLL level could materialise if downside momentum persists.
Sources: EIA, Reuters, TradingView
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