Crude is holding strong above its psychological $80/bbl level despite briefly dipping below in reaction to the negative Prelim GDP data from Britain. Britain's shocking data sent the Cable tumbling and resulted in broad-based Dollar strength. Fortunately for bulls, Britan's GDP is primarily composed of services and not manufacturing. Meanwhile, the EUR/USD, AUD/USD and gold are holding strong, a positive catalyst for crude. We previously noted the importance of today's EU PMI data. The PMI flashes printed positively mixed and show that the EU's economic recovery is on track. The outperformance of the Manufacturing PMI helps improve the outlook for aggregate demand for and consumption of crude. In addition to positive news from the EU, U.S. Q3 earnings continue to outperform and Existing Home Sales surged. The rapid recovery in U.S. corporate performance also bodes well for the demand side of the equation. Since investors received light gasoline inventories this week, both the supply and demand sides are working in favor of Crude's upward trajectory.
Technically speaking, crude's high volume topside breakout on Wednesday improves the outlook for continued near-term gains. Furthermore, the resilience of crude above $80/bbl is encouraging, and the futures could form a solid base from which to build higher. The only topside technical barriers we see right now are previous October highs, our 3rd tier uptrend line, and the psychological $85/bbl level. That being said, it's never a bad thing to have an uptrend line serving as a topside technical. As for the downside, crude potentially has multiple uptrend lines serving as technical cushions along with 10/22, 10/21, and 10/16 lows. Additionally, the psychological $80/bbl and $75/bbl should work in crude's favor. Meanwhile, investors should continue to eye the EUR/USD's interaction with 1.50 and gold's struggle with $1050/oz. A breakout in either investment vehicle should yield further gains in crude due to the influence of correlations.
Resistances: $81.02/bbl, $81.50/bbl, $82/bbl, $85/bbl
Supports: $79.84/bbl, $79.39/bbl, $78.38/bbl, $77.74/bbl
Psychological: $85/bbl, $80/bbl, $75/bbl