Crude Oil Weekly Technical Outlook

Reuters/ Jefferies CRB Index dropped -5% to settle at 233.51 as investors turned risk averse and sought shelter in Japanese yen and US dollar. USD gained most against commodity currencies such as Australian dollar (+2.2%) and African rand (+3.7%) as prices of energy and precious metals tumbled. Other risk investments also got hit. In the US, Dow Jones Industrial Average slipped -1.6% to settle at 8146.5 while S&P 500 Index plunged -1.9% to 879.1. Investors have turned defensive and further selloff is likely in the near-term.

Written by Oil N' Gold | Sat Jul 11 09 14:02 ET
Nymex Crude Oil (CL)

Crude oil's fall extended further to as low as 58.72 last week and took out 55 days EMA at 63 and then medium term channel support at 60.83. Initial bias remains on the downside this week and further decline should be seen to key resistance turned support at 54.66 next. On the upside, above 61.57 minor resistance will indicate that a short term bottom might be formed with mild bullish convergence condition in 4 hours MACD. Some consolidation should then be seen but upside is expected to be be limited by double top neckline at 66.2 bring fall resumption.

In the bigger picture, the break of medium term channel support last week confirmed that rise from 33.2 has completed at 73.83 already, ahead of 38.2% retracement of 147.27 to 33.2 at 76.77. The three wave structure of the rise from 33.2 to 73.83 suggests that it's corrective in nature. In addition, Crude oil failed to sustain above both 55 weeks and 55 months EMA. Hence, such rise from 33.2 to 73.83 is treated as a correction in the larger fall from 147.24 only. Decline from 73.83 is now expected to extend further to a new low below 33.2. On the upside, break of 66.2 resistance is at least needed to indicate that fall from 73.83 has completed and revive the possibility that rise from 33.2 is still in progress. Otherwise, outlook will remain bearish.

In the long term picture, recent development suggests that fall from 147.24 to 33.2 is likely just part of the correction to the five wave sequence from 98 low of 10.65. That is, another medium term will likely be seen before completing such consolidation. Nevertheless, strong support is still expected inside 17.12/37.0 support zone to complete the correction.