Crude futures are benefitting from a return to the risk trade as investors react to positive Chinese manufacturing data along with an RBA rate increase of 25 basis points. China's reassuring Manufacturing PMI numbers are improving the outlook for crude's aggregate demand, resulting in a positive impact on price. Additionally, the RBA's rate increase is a vote of confidence to the current global economic recovery. On the other hand, both UK and U.S. Manufacturing PMIs printed shy of analyst expectations, taking a bit of wind out of the rally's sails. However, any negative forces are being countered effectively by the Dollar's negative reaction to today's set of economic events while gold knocks at its highly psychological $1200/oz level. A weaker Greenback makes Dollar-based commodities, such as crude, cheaper and a more attractive U.S. export, resulting in positive price movements in crude. Meanwhile, the S&P futures have topped the 1100 mark once again, and it will be interesting to see if the S&P can extend intraday gains and take down previous 2009 highs. If so, the Dollar may be encouraged to pullback further and consequently push crude futures higher. Therefore, investors should monitor the S&P's interaction with current technical levels in addition to the EUR/USD's potential retest of its November highs.
Technically speaking, crude futures have our 1sst tier uptrend line serving as a technical cushion along with Monday lows and the psychological $75/bbl level. As for the topside, crude faces our 1st and 2nd tier downtrend lines along with 11/18, 11/4, and 10/21 highs. Furthermore, the psychological $80/bbl level proved to be a tough barrier to overcome in the past, meaning crude faces a few challenging near-term topside obstacles. Meanwhile, the U.S. will release its ADP Non-Farm Employment Change data along with weekly crude inventories. Should the ADP figure signal further improvement in America's employment market, this could yield another positive movement in crude due to an increase in expected aggregate demand.
Resistances: $78.61/bbl, $79.07/bbl, $79.51/bbl, $79.93/bbl, $80.41/bbl, $80.93/bbl
Supports: $77.87/bbl, $77.74/bbl, $77.15/bbl, $76.80/bbl, $76.23/bbl, $75.80/bbl
Psychological: $75/bbl, $80/bbl, $70/bbl