Crude finally busted through $75/bbl and previous 2009 highs after positive earnings and econ data, including a strong Empire Index and lighter than expected crude inventories. Weekly Unemployment Claims also came in lower than expected. The gradual improvement in unemployment is positive for aggregate demand and should help lift consumer sentiment over time. Even though the EUR/USD and gold didn't participate, a huge breakout in the GBP/USD helped drive crude higher due to the prospect of higher demand from Britain. However, today's earnings from BofA and GE disappointed and Prelim UoM Consumer Sentiment printed weak. Therefore, the economic recovery still has holes and crude is consolidating in reaction to the news.
Regardless of today's profit taking, crude has made a very bullish move by separating itself further from what is now our 2nd tier downtrend line along with September highs. Yesterday's breakout should result in further near-term gains along with a test of the psychological $80/bbl. Meanwhile, volatility should increase next week since investors will receive public addresses from the Fed, BoE and RBA. Additionally, China will release a key wave of econ data on Wednesday along with U.S. and British data throughout the week. The combination of these events should move the Dollar and determine whether the rapid, broad-based depreciation takes another step forward. The further the Dollar depreciates the higher crude climbs. Therefore, investors should keep a close eye on the major Dollar pairs, particularly the EUR/USD and GBP/USD.
Resistances: $77.54/bbl, $77.89/bbl, $78.15/bbl, $80/bbl
Supports: $77.05/bbl, $76.81/bbl, $76.35/bbl, $75.90/bbl, $74.92/bbl
Psychological: $80/bbl, $75/bbl