Crude Oil Price Update – Hovering Just Above Major Support Zone at $88.26 – $81.85

U.S. West Texas Intermediate crude oil futures are easing on Monday after a three day rally as hawkish chatter from Fed officials continued to push up the chances of an aggressive Fed rate hike in September. Rising rate hike expectations are also driving the U.S. Dollar higher, dampening foreign demand for the dollar-denominated asset.

In the U.S., Richmond Fed President Thomas Barkin joined a number of Fed officials in calling for the central bank to remain aggressive in its battle to drive down inflation.

At 06:59 GMT, October WTI crude oil futures are trading $89.08, down $1.36 or -1.50%. On Friday, the United States Oil Fund ETF (USO) settled at $74.08, down $0.13 or -0.17%.

Not only are traders worried that higher U.S. interest rates will weaken the global economy, but a rate cut by the People’s Bank of China (PBOC) also sent signals that the country’s economy is weakening enough to require stimulus to keep it propped up.

China is also imposing power restrictions in some regions getting hit by a heatwave. Traders see this slowing fuel demand as another negative for crude oil prices.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $94.17 will change the main trend to up. A move through $85.37 will reaffirm the downtrend.

On the downside, the first major support is the long-term 50% level at $88.26, followed by the long-term Fibonacci level at $81.85.

On the upside, the nearest resistance is the minor pivot at $89.77, followed by the short-term retracement zone at $92.56 to $94.26.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at $89.77 and the long-term 50% level at $88.26 is likely to determine the direction of the October WTI crude oil market on Monday.

Bearish Scenario

A sustained move under $88.26 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the main bottom at $85.37.

A trade through $85.37 will reaffirm the downtrend with the long-term Fibonacci level at $81.85 the next major target.

Bullish Scenario

Holding the long-term 50% level at $88.26 will indicate the presence of buyers. Overtaking the minor pivot at $89.77 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the next target the short-term 50% level at $92.56, followed by the resistance cluster at $94.17 to $94.26.

The short-term Fib level at $94.26 is a potential trigger point for an acceleration to the upside.