Crude Oil Price Update – Lower as Strong Economic Data Raises Fears of More Fed Tightening

U.S. West Texas Intermediate crude oil futures are weaker late in the session on Thursday after giving up earlier gains.

Helping to put a lid on prices was a rise in the U.S. Dollar, which strengthened after fresh economic reports suggested the Federal Reserve would have to raise rates for longer than previously anticipated.

Sellers may have also been influenced by a massive build in U.S. crude oil stockpiles reported on Wednesday although prospects for a Chinese demand recovery likely offset this news.

At 20:15 GMT, April WTI crude oil futures are trading $78.29, down $0.54 or -0.69%. The United States Oil Fund ETF (USO) is at $68.50, down $0.52 or -0.75%.

Traders Tracking U.S. Economic Reports Closely

The price swings in the market this week strongly suggest that the crude oil market has become data dependent. Not just the traditional supply/demand numbers but also U.S. economic data that has a strong influence on Fed policy.

Throughout the week, including today’s stronger-than-expected producer price index (PPI) report, hot economic data has been signaling to traders that the Federal Reserve has to continue to raise interest rates or risk losing control over inflation.

This is driving up Treasury yields, while boosting the U.S. Dollar. Since crude oil is a dollar-denominated assets, foreign demand for the asset tends to weaken.

In addition to the strong economic news, a gauge of manufacturing in the mid-Atlantic region unexpectedly plunged. The led to increased worries about a recession, which would also put a dent in demand.

Daily April WTI Crude Oil Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through $77.47 will signal a resumption of the downtrend. A trade through $80.78 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through $77.47 will change the minor trend to down.

The nearest resistance is a 50% level at $79.76. This stopped the rally on Thursday. The closest support is a pair of 50% levels at $77.77 and $76.76. The latter is a potential trigger point for an acceleration to the downside.

Daily April WTI Crude Oil Technical Forecast

Trader reaction to $79.13 is likely to determine the direction of the April WTI crude oil market into the close on Thursday.

Bearish Scenario

A sustained move under $79.13 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into a 50% level at $77.77, a minor bottom at $77.47 and a support cluster at $76.76.

Taking out $76.76 with conviction could trigger an acceleration to the downside with $72.64 the next major downside target.

Bullish Scenario

A sustained move over $79.13 will signal the presence of buyers. If this creates enough upside momentum then look for a surge into the main 50% level at $79.76.