Oil, Natural Gas, US Dollar Technical Analysis Following Market Volatility

The latest economic data from the United States (US) shows a decline in existing home sales for September, which fell to 3.84 million units. This figure missed the consensus of 3.9 million and is down from August’s 3.86 million. This weakness in the housing sector reflects broader economic concerns as the Federal Reserve weighs its next policy move. The CME Fedwatch Tool indicates an 88.9% probability of a 25 basis point rate cut at the upcoming Fed meeting in November. This suggests the market is factoring in some monetary easing. However, the rise in US 10-year yields to 4.24% and the ongoing rally in bond yields create a challenging environment. This signals that the Fed might not aggressively pursue rate cuts soon. With higher yields, the US dollar continues to strengthen.

The US dollar index (DXY) consolidates near an 11-week high of 104.00. This is driven by the widening rate differential that favours the Greenback. The Federal Reserve is cautious about rate cuts, so the dollar remains well-supported. The weakness in global equities also adds to the dollar’s appeal as a safe haven. China’s indices are the exception to this trend.

The US election is also creating market uncertainty, fueling the strength of the US dollar. These market uncertainties have impacted the oil market, adding strong volatility due to escalating geopolitical tensions in the Middle East. Market volatility was further affected by a larger-than-expected increase in US crude inventories, which rose by 1.6 million barrels last week. The market volatility is fuelled by concerns about supply disruptions from the Middle East, impacting the oil and natural gas (NG) markets. WTI crude oil (CL) is consolidating within a wide range between $80 and $65, while natural gas prices are consolidating within the range of $2.10 and $2.70.

WTI Oil (CL) Technical Analysis

WTI Daily Chart – Market Volatility

WTI crude oil has formed a descending broadening wedge pattern on the daily chart. These patterns indicate strong volatility within wide ranges. The trend remains bearish since the price trades below the 200 and 50 SMA. However, the emergence of the descending broadening wedge suggests that prices may rebound higher from these levels. The volatile nature of the descending broadening wedge drives this potential upward swing. 

WTI 4-Hour Chart – Short-Term Strength

The 4-hour chart shows price consolidation within an ascending channel pattern. The price rebounds from the support level, marked by the red arrows on the 4-hour chart. This price reversal indicates short-term strength. However, there is no clear direction for oil prices at the moment. A break above $71.57 on the daily chart will push prices higher.

Natural Gas (NG) Technical Analysis

Natural Gas Daily – Breaks from 50 SMA

Natural gas has broken above the 50 SMA after consolidating between the 200 and 50 SMA. The price trades within a triangle pattern, with support at $2.08 and resistance at $2.65. A break of either of these levels will determine the next direction for natural gas prices.

Natural Gas 4-Hour Chart – Reversal

The 4-hour natural gas chart shows price strength at the short-term support level of $2.08. A break below $2.08 will likely drive prices lower toward $1.87. However, the current strength indicates a continuation of upward momentum.

US Dollar (NG) Technical Analysis

US Dollar Daily Chart – Breaks 103.90

The US dollar has broken the strong resistance of the 200 SMA and continues to move higher. The continuation after breaking 103.90 indicates that the index may reach around 105.60. This level is measured from the 1-year trendline extending from October 2023. The double bottom formation in the US Dollar Index highlights ongoing price strength. However, the RSI indicates an overbought region and suggests a price correction.

US Dollar 4-Hour Chart –Price Strength

The 4-hour chart of the US dollar index shows price strength. The price finds support at the midline of the RSI and continues to advance higher. The formation of a falling wedge at the bottom, followed by a breakout of resistance, indicates that the US dollar index may continue to rise in the short term.