Crude Oil Price Update – Successful Test of Value Zone, Dovish Fed Member Comment Triggers Strong Rebound

U.S. West Texas Intermediate crude oil futures are trading lower late in the session after clawing back most of its earlier losses.

The market was pressured from the opening as traders priced in the prospect of a huge U.S. rate hike at the Federal Reserve’s July 26-27 monetary policy meeting that could curtail inflation but at the same time stunt economic growth and oil demand.

At 18:05 GMT, September WTI crude oil is trading $93.51, down $0.32 or -0.34%. This is up from an intraday low of $88.23. The United States Oil Fund ETF (USO) is at $72.86, down $0.33 or -0.45%.

Crude oil was down more than $4.00 earlier in the session on the notion the Fed might raise its benchmark interest rate 100 basis-points later this month. However, the sell-off began to ease after Fed Governor Christopher Waller said he supported another 75 basis point interest rate increase in July. This helped alleviate some of the recession-induced demand worries.

Technically Speaking…

September WTI crude oil futures may have finally reached a value zone on Thursday when a test of the main retracement zone at $89.54 to $82.80 triggered a massive intraday rally.

The main trend is down according to the daily swing chart. A trade through the intraday low at $88.23 will signal a resumption of the downtrend. The main trend will change to up on a move through the nearest swing top at $102.00.

The main range is $60.99 to $118.08. Its retracement zone at $89.54 to $82.80 is controlling the longer-term direction of the market. On Thursday, this zone stopped the selling at $88.23.

The intermediate range is $85.37 to $118.08. Its retracement zone at $97.87 to $100.73 is the first upside target.

The short-term range is $118.08 to $88.23. If the main trend changes to up then look for the buying to possibly extend into its retracement zone at $103.16 to $106.68.

Short-Term Outlook

Trader reaction to $89.54 to $82.80 will determine the next major move in September crude oil futures.