Crude oil markets rallied again early during the day on Wednesday, as we continue to see upward pressure over all.
The West Texas Intermediate Crude Oil market rallied a bit during the trading session, breaking through a significant resistance barrier. This of course was the $83.50 level, and a lot of attention will be paid to this. The first hints of this happening later in the day on Tuesday, as the market initially fell down to the $80 level, only to turn right back around and form a major hammer. All things being equal, this is a market that I think will continue to attract buyers on dips, as OPEC keeps its position of cutting back production intact.
Underneath, the 200-Day EMA sits right around the $77.80 level, and therefore I think that’s essentially the “floor in the market”, although I don’t necessarily see this market getting down there anytime soon. On a move higher, the next obvious target would be the $85 level, and then possibly the $87.50 level after that.
Brent obviously rallied as well, but did not break above the $87.50 level, so it is lagging just a bit. That being said, these 2 markets move in the same direction over the longer term, so even if Brent doesn’t make a breakout right now, if the WTI market continues to go higher, that will probably drag this market right along with it. Short-term pullbacks should continue to be buying opportunities with the 200-Day EMA hanging around the $82.25 level.
All things being equal, I do like the idea of buying dips, because it offers value in a market that was so obviously bullish over the last couple of months. The bullish flag that previously had been formed suggested that we were going to get to the $90 level, but ultimately, I think this is a situation that may have to build up the necessary momentum, so do be aware of the fact that there might be the occasional volatile pullback. However, as things continue to play out the way they have, it’s very likely that we will have people looking for value any time they get an opportunity to find it. I have no interest in shorting anytime soon as the market has clearly made up its mind.
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Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.