Analysis by Mfanafuthi Mhlongo, Trive Financial Market Analyst
The WTI Oil Futures (NYMEX: CL) are trading flat on Thursday as the bulls seemingly take a breather from the two-day spectacular rally, which has seen the futures rise over 2.93% for the week. The weekly gains were primarily driven by the Fed officials’ dovish remarks, which were also supported by the cooler-than-expected inflation figures, with the core inflation rate and inflation rate for June cooling to 4.8% and 3% year-on-year, respectively, against the market’s expectations of 3.1% and 5%.
However, the surprising oil inventory build-up could look to cap the oil futures upside in the short term despite the optimistic US data. The EIA reported late on Wednesday that the crude oil inventories grew by 5.946 million barrels, against the market expectation of a build-up of 483,00 barrels.
The daily chart shows that the oil futures have recently broken above a descending channel trading pattern, and the price action is currently confined between the 50% and 61.80% Fibonacci retracement level as the market awaits the US PPI data for further directive on the movement of the futures in the short term.
The break above the bound would bring the $79.19/BLL price level into play, while a break below would leave the breakout level at $73.98/BLL within the bears’ reach. The price action has also firmly established a major resistance level at $83.53/BLL (green line) and a major support level at $66.80/BLL (red line).
Zooming into the 4H chart shows that a trading opportunity could exist at the $77.19/BLL price level towards the $79.19/BLL should the bulls maintain a break above the golden ratio. However, a break below the 50% Fibonacci retracement level could offer a trading opportunity as the price action moves towards the breakout level and eventually the 50-SMA (blue line).
A sustained push below the 50-SMA could confirm the bearish sentiment, bringing the $72.69/BLL and $70.76/BLL support levels into play in the short term.
The oil futures seem to have steadied higher ahead of the US PPI data, and the bulls’ could be hoping the data could help the price action climb even further higher, with the $77.96/BLL price level likely to act as a level of significance for the bulls. However, hotter-than-expected PPI data could help rob the bulls of some of their spectacular gains.
Sources: TradingView, Reuters, CNBC, EIA.
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