Crude Oil Price - Mar. 4, 2013

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By: DailyForex.com

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.

Crude Oil

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.