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Crude Oil Price Update – Closing Price Reversal Top Will Be First Sign of Weakening Momentum

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James Hyerczyk
·2 min read
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U.S. West Texas Intermediate crude oil futures are trading higher late in the session on Thursday, helped by tightening supplies and strict compliance to the OPEC+ plan to reduce production. Perhaps slowing down the price surge is the stronger U.S. Dollar, which tends to reduce demand for dollar denominated assets like crude oil.

On Wednesday, OPEC+ extended its oil supply pact at existing levels, suggesting that producers are happy the cuts are draining inventories. Also on Wednesday, government data showed that U.S. crude oil stockpiles last week unexpectedly fell to their lowest level since March 2020.

At 20:55 GMT, March WTI crude oil futures are trading $56.35, up $0.66 or +1.19%.

In economic news, U.S. Labor Department data, which showed a drop in Americans filing new applications for unemployment benefits last week, helped boost prices, while investors were also expecting positive data from the government’s comprehensive monthly employment report due on Friday.

Daily March WTI Crude Oil
Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $56.58 will signal a resumption of the uptrend.

The main trend will change to down on a move through the last main bottom at $51.64. This is highly unlikely, but we could see a closing price reversal top due to the prolonged price and time rally. This pattern won’t change the trend to down, but if confirmed, it could trigger the start of a 2 to 3 day correction.

The new minor range is $51.64 to $56.58. Its retracement zone is potential support at $54.11 to $53.53. This zone will move up as the market moves higher.

Short-Term Outlook

We’re in a momentum driven market so if this continues, we should see a rally into the January 8, 2020 top at $57.41. We’ve been mentioning for several weeks that there was no resistance between $53.94 and $57.41. This week’s rally validates that assessment.

A higher-high, lower-close chart pattern will weaken the momentum. This would change the trend to down, but it could trigger a 2 to 3 day break into at least $54.11 to $53.53. This 50% to 61.8% retracement zone will move up with each new high.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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