I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside.
If we do break down below that area, then it’s likely that this market could get hammered, perhaps opening up a move to the $85 level, then followed by the $80 level, an area that obviously has a significant amount of psychology attached to it, and has quite a bit of historical importance as well. That being said, the market continues to see a lot of volatility, and typically volatility means that the market will eventually fall.
When you look around the world, there is a severe concern when it comes to global growth, as it seems to be disappearing. Any lack of growth is almost always shown up as negativity in the oil market, as demand should drop overall. I think that’s what is being priced in right now, so it is most certainly going to continue to be negative. That being said, we have seen a little bit of a bounce, and the volatility of oil will more likely than not continue to be a major factor.
It looks as if the $94 level above should continue to be resistance, and breaking above that would be a pretty strong sign. I don’t necessarily see that happening anytime soon, but it’s something to keep in the back of your mind. As things stand right now, it looks like we are grinding back and forth in order to try and find some type of consolidation pattern, but it most certainly seems to be favoring the downside in general. Because of this, I will be looking for short-term rallies that I can fade because it should offer a bit of value to the downside. The US dollar continues to be a very strong currency anyway, so I think it only makes sense that the oil markets will struggle to keep up against that type of massive momentum in the currency market.
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