The WTI Crude markets fell during the session on Friday, but bounced in the end to form a hammer. I have been talking for some time about the potential support at the $90.00 level, and it appears that it has arrived during the session. The level produced a serious bounce from the level of $1.00, and as a result the hammer looks like it is going to be strong. However, there are several factors churning at the same time, and this could keep the market fairly volatile as a result.
The Federal Reserve continues to keep monetary policy relatively loose, and as a result the Dollar should be losing steam. However, this isn’t the case at all, as the Italian elections threw a lot of uncertainty into the markets in general, causing a “risk off” trade to dominate the markets.
The oil markets should begin to pick up a bid though if we can get some kind of stability in the currency markets. Ironically, the most important pair to watch might actually be the EUR/USD pair, even though the Europeans aren’t exactly a petro-powerhouse. The fact is that the Dollar keeps getting stronger, and as a result – it is taking less of them to buy oil. This is mainly the fault of the Euro and Pound.
New range in the market?
I believe that we are going to see a new range in this market now. I think the $90.00 level will offer support, and the area below it looks very noisy. This should continue to offer support all the way down to the $85.00 level, and as a result I think the path of least resistance is higher over the longer-term. The top of this range will more than likely be at the $98.00 level though, and as a result I think we are forming a new consolidative range.
Adding to that is the fact that we aren’t too far from the driving season in the United States, and demand will certainly pick up as a result. This should help keep prices somewhat elevated going forward, and as a result I plan on playing this range. A break of the highs of the Friday session has me buying.