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Crude Oil Forecast: Markets Continue to Recover From Recent Selloff

Earlier today, the Norwegian central bank hiked rates again, and several other central banks around the world are likely to do so as well. 

WTI Crude Oil (US Oil)

On Thursday, the West Texas Intermediate Crude Oil market rallied, breaking above the $70 level. However, this uptick may just be a temporary bounce from a bear market oversold condition. It's likely that signs of exhaustion will appear soon, and oil prices may drop even further. After all, there is a ton of previous trading action just above, and typically “market memory” will come into the picture and make this difficult to overcome.

Psychological and structural resistance may come from the 50-Day EMA, which sits just above the $75 level. The market has been consolidating between $80 on the upside and $72.50 on the bottom, with an overall negative sentiment due to concerns over the global economic slowdown. As energy is a key factor in global growth, this market will be sensitive to any changes in the economic outlook. As the global economy slows down, typically you will see a lot less demand, as traders have been pricing into the market for some time.

WTI Crude Oil

Brent (UK Oil)

  • On Thursday, Brent markets also saw a rally, indicating a recovery in the market.
  • The $70 level had previously served as a hard floor, but as we approach the $77.50 area, which is the bottom of the overall range, we may encounter some market memory that could act as a barrier.
  • When we see signs of exhaustion, it's likely that sellers will jump back into the market.

To consider buying, we would need to break above the 50-Day EMA, currently near $81.55. However, that doesn't seem very likely. Nonetheless, this market is known to be very noisy. If you wait for signs of exhaustion, you can join in with the longer-term trend. It's worth noting that the $70 level is a major level on longer-term charts. Additionally, keep in mind that the value of the US dollar could also have an impact on the market, as a rise in the value of the US dollar typically works against commodities. Because of this, traders will have to pay close attention to the US Dollar Index, and of course, comments coming out of central banks around the world. Earlier today, the Norwegian central bank hiked rates again, and several other central banks around the world are likely to do so as well. This should slow down economic growth, which of course should keep oil stagnant to negative.

Brent Crude Oil

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Christopher Lewis
About Christopher Lewis

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.


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