WTI Crude – Pointing Lower On Tech & Fundamentals Drivers

Prices of WTI continue to decline despite the initial bullish jump when a weaker than expected NFP print was released last Friday. It is debatable how one should interpret the NFP numbers, as equities traders thought that it was bearish, while Gold traders considered it bullish as they believe that weaker payroll numbers would deter Yellen and the new FOMC voting members that further tapering should not occur so soon. Things get even more complicated when you consider that WTI prices traded sharply lower a couple of hours after the numbers were released, yet prices recovered once again to close at $92.8 a barrel, which is the level around the swing high of 9th Jan, but a significant way above recent swing low of $91.22 and more importantly a decent recovery post NFP low of $92.3.

Hourly Chart

Nonetheless, regardless of what the “proper” reaction of NFP numbers should be, it is clear that prices is respecting technical trendlines well. The decline post NFP last Friday coincide with the confirmation of Channel Top holding after the initial bullish push when NFP numbers were released failed to close above the aforementioned Channel Top. This morning’s decline also coincide with the holding of Channel Top after the late Friday push failed to overcome the same trendline. Hence, knowing that technical pressures remain strong, we can reasonably assume that direction of WTI remains bearish in the Short-Term, with the next bearish target being Channel Bottom and $92.0 – 92.20 band interim support.

Daily Chart

Daily Chart is similarly bearish, but a short/mid term bullish pullback cannot be ruled out as long as price stay above $92.0. Firstly, prices appears to have rebounded off the descending Channel Top, and Stochastic curve is pointing higher, potentially breaking the 20.0 level and giving us a bullish cycle in the next few days. Furthermore, there hasn’t been a significant bullish pullback or a technical rebound since the sharp decline from above 100.0 back in late Dec, and a pullback scenario is highly possible from here out. However, bulls should ideally break $93.0 resistance, which will lead us back into the 93.0 – 95.0 consolidation range that was found in the month of Nov 2013.

Fundamentally, Crude Oil is still bearish though. Institutional speculators have cut their bullish bets, with latest Commitment of Traders report showing the largest decline of net-long positions since June 2013. Short bets have also enjoyed the largest weekly gain since April 2013 – highlighting the change in sentiment of speculators. The nuclear crisis of Iran appears to be easing as well, as the UN security council members are reported to be closer to implementing the deal to halt Iran’s nuclear program. This is certainly not a game changer but will definitely alleviate a lot of the tension that has kept Crude prices afloat even when global demand is falling. Take away this safety net, we could see WTI potentially fall further in early 2014.

More Links:
EUR/USD Technicals – Triple Top Pattern Invalidated But Bulls Remain Tentative
AUD/USD Technicals – Post NFP Rally Giving Bears Run For Their Money
Gold Technicals – Remaining Bullish After NFP Dust Has Settled

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