Crude Oil Price - Feb. 20, 2013

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By: DailyForex.com

The WTI crude markets rose during the session on Tuesday, breaking above the $97.00 level yet again. We have been in a consolidation area for some time now, and this simply looks like a continuation of that. I don't necessarily think that the $90.00 level is about to get broken through, but if it does it would be a very bullish sign. However, I have to admit that the $100.00 level looks like it's going to be quite a bit of resistance as well, and as such the upside is probably somewhat limited because of it.

Crude Oil 22013

Looking at this chart though, selling is going to be very difficult to do as the $95.00 level should continue to offer support. In other words, we are essentially stuck at this consolidation range, and as a result this is a short-term traders market at best. However, sooner or later we will breakout and I believe that this market has massive resistance at $100.00 that could be broken and send this into another leg higher. As for selling this market, the downside what how several support areas, but I believe that a break down below $95.00 could possibly see a run back down to the $93.00 level.

A proxy for global growth

A lot of times, this market is used as a proxy for global growth and possible expansion. Traders will buy oil markets in reaction to anticipated growth in the industrial space worldwide, and as a result this market doesn't necessarily always reflect actual demand. In fact, demand is relatively weak in most of the industrial areas as they are either in recession, or growing very slowly.

However, you also have to keep in mind that the Federal Reserve controls the value of the dollar by expanding quantitative easing. In other words, a weaker dollar means that it will take more of them to buy commodities such as oil. With that in mind, we could get another spike higher based on liquidity issues alone. Because of this, I am essentially looking to only buy this market, but would have the good on shorter time frames as the market space right now is relatively tight.

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.