The WTI futures (NYMEX: CL) are poised for their third consecutive day of gains following a recent downturn. The market experienced a selloff since late January, with futures shedding nearly 7%. This decline was influenced by reports of progressing ceasefire negotiations between Israel and Hamas and adjustments in expectations regarding the Federal Reserve’s rate easing timeline, which bolstered the US dollar. Concerns surrounding the economic recovery in China also contributed to downward pressure.
However, ongoing tensions in the Middle East continue to factor into market dynamics, leading to the pricing in of supply risks and supporting a bullish recovery. Additionally, the API crude oil stocks change revealed a smaller-than-expected increase in crude oil inventories at 0.674 million barrels, missing the consensus of 2.133 million barrels, signalling positive demand.
The 4H chart shows a breakdown at the ascending channel, leading to a prolonged downturn. The bearish tilt is confirmed by the crossing of the 25-SMA (green line) below the 50-SMA (blue line) and 100-SMA (orange line). However, support was found at the demand zone near $71.57 per barrel (BLL), a potential pivot point for the price trajectory.
The futures have broken above the 25-SMA, signalling a bullish shift in momentum. The first hurdle at $74.19/BLL could be pivotal in determining whether the retracement will be sustained. If the price clears this level, it could test the Fibonacci midpoint at $74.76/BLL and the 61.8% Fibonacci golden ratio of $75.55/BLL. The 50-SMA backs this resistance and could prevent further upside if the bullish momentum loses volume.
However, failure to exceed the $74.19/BLL resistance could be detrimental to the recovery. Another pullback toward $73.09/BLL could be possible, where a breakdown could lead the price back to the prior demand zone. If the market fails to provide buyers this time around, the futures could trickle down toward the neckline support at $70.14/BLL.
The WTI futures are looking to recover from a recent selloff that saw it lose more than 7%. Resistance at $74.19/BLL could be worth watching in the upcoming sessions to gauge whether the current upward momentum will be sustained.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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