Crude futures are trading back beneath the highly psychological $70/bbl level as the Dollar appreciates across the board and gold comes off all-time highs. Crude futures failed to break through 9/22 highs and our 2nd tier downtrend line yesterday despite the gold rush and an incredible breakout in the AUD/USD. Instead, crude experienced a moderate down-bar on sizable sell-side volume. Weekly crude inventories also came in shallow, which makes present weakness in crude a little disconcerting. Crude futures seem to be tracking the EUR/USD and GBP/USD more than gold and other major Dollar crosses. The EUR/USD and GBP/USD both failed to participate fully in gold's record-setting breakout and the currency pairs still face a few immediate-term technical barriers. Additionally, the S&P futures need to deal with previous 2009 highs while the 30 Year T-Bond futures look to retest monthly highs. Hence, the breakout in precious metals doesn't seem to favor crude as much as investors would hope. Furthermore, investors should keep in mind that OPEC will likely tailor production to keep the price of crude within its desired $68-$72/bbl range.
As with equities and the FX markets focus will shift to Q3 earnings. Q3 results and outlooks should help determine the near-term path of U.S. equities and the Dollar, and crude should ultimately follow the lead of its correlations. Meanwhile, the $70/bbl area should continue to play a psychological role in the movements of crude. On an encouraging note, crude continues to set lower highs after bottoming on 9/25. Crude futures have a few uptrend lines we can create below present levels while the futures also face multiple downtrend lines. Our trend lines are beginning to converge and reach inflection points, meaning crude may diverge from its two month trading range should Q3 earnings surprise in either direction.
Resistances: $70.04/bbl, $70.36/bbl, $70.73/bbl, $71.13/bbl, $71.62/bbl, $72.04/bbl
Supports: $69.23/bbl, $68.89/bbl, $68.42/bbl, $68.08/bbl, $67.76/bbl
Psychological: $70//bbl, $65/bbl, $75/bbl