Crude's rally was deflected by our 1st tier downtrend yesterday and the futures neglected to test the highly psychological $80/bbl level. Crude is presently consolidating back around $78/bbl as investors await weekly crude inventories. Investors are expecting an inventory decline of -400k barrels. Should inventory data print lighter than expected, crude may opt to retest our 1st tier downtrend line. Investors should keep in mind that the $80/bbl level has proven to be a strong psychological barrier over the past month and a half of trading. Meanwhile, the Dollar is strengthening a bit after ADP Non-Farm Employment Change data came in a little weaker than analyst expectations. However, today's Dollar strength could be minimal since investors may place more weight on tomorrow's ECB meeting along with key UK and U.S. econ data releases. That being said, investors should keep an eye on the overall behavior of the risk trade over the next 24-48 hours. Should the ECB have a hawkish monetary stance along with positive econ data from the UK and U.S., then we may witness another wave of Dollar weakness, a positive catalyst for crude. However, should the ECB issue a cautious monetary statement along with unimpressive data, then crude may opt to consolidate back towards our 1st tier uptrend line and 11/25 lows.
Technically speaking, crude futures have our 1st tier uptrend line serving as a technical cushion along with 11/25 lows and the psychological $75/bbl level. As for the topside, crude faces our 1st and 2nd tier downtrend lines along with 12/01, 11/23, and 11/18 highs. Hence, crude appears to be wedged between solid supports and resistances as investors decide where to send the Dollar and equities over the near-term. That being said, investors should also monitor the S&P's interaction with 1100 and previous 2009 highs since equities are normally positively correlated with crude.
Resistances: $78.61/bbl, $79.07/bbl, $79.51/bbl, $79.93/bbl, $80.41/bbl, $80.90/bbl
Supports: $77.56/bbl, $77.18/bbl, $76.80/bbl, $76.23/bbl, $75.80/bbl, $75.53/bbl
Psychological: $80/bbl, $75/bbl