Commodities

WTI oil futures face another failure, but keep eyes on 98.50

WTI oil futures (May delivery) retreated towards the 100 level early on Thursday after a strong rejection from the 20-day simple moving average (SMA) at 107.78.

The sharp rebound off 92.19 in mid-March did not drive the black gold back to the 13-year high of 130.50, with the market creating a lower high at 116.62 instead. That said, the market is still set for a bullish monthly close.

Technical signals are not encouraging either as the 20-day SMA looks to be pivoting to the downside. Likewise, the RSI and the MACD have resumed a negative slope, with the former set to cross below its 50 neutral mark and the latter decelerating below its red signal line.

Despite the technical discomfort, traders may wait and see whether the bears can push the price below December’s key ascending trendline at 98.55. The resistance line, which was active from March 2021 to February 2022, is passing through the same location, making any violation important to watch. In case that base collapses, the price could retest the support region of 92.69. Any violation at this point would ruin the positive trend in the market, likely squeezing the price towards the 61.8% Fibonacci retracement of the 62.25 – 130.50 upleg at 83.95. Slightly lower, the 200-day SMA may attempt to pause the sell-off ahead of the 78.6% Fibonacci of 76.86.

In the event the trendline puts the brakes on the bearish action, a bounce above the 20-day SMA could be a prerequisite to revisit the 23.6% Fibonacci of 114.39 and the previous high of 116.62. Beyond the latter, the door would open for the 124.55 number, which the market could not successfully claim earlier this month, while higher, all eyes will turn to the 130.50 top.

In brief, WTI oil futures have been showing some fragility since the peak at 130.50 earlier this month. The short-term bias is currently viewed as neutral-to-bearish, but sellers may not take the upper hand unless the price tumbles below 98.50. 

About the author

Christina Parthenidou

Christina joined the XM investment research department in May 2017. She holds a master degree in Economics and Business from the Erasmus University Rotterdam with a specialization in International economics. Previously, she earned a bachelor of science in Economics from the University of Cyprus. Apart from foreign exchange markets, her research interests include the impact of International trade on labour markets and product development.

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