Crude futures continued their ascent and tested $80/bbl as expected. Crude futures have been energized by the combination of an improvement in unemployment, last week's jolt in manufacturing data, and an impressive flow of Q3 earnings results. All three factors serve as positive catalysts in regards to the aggregate demand for and consumption of crude. Additionally, last week's inventory data came in light of expectations. Hence, both the supply and expected demand factors of the equation are working in crude's favor. However, the futures are presently experiencing profit taking after hitting $80/bbl in the wake of weak PPI and Building Permits data. Investor focus now turns BoE Governor King's public address later today followed by MPC Meeting Minutes and key Chinese economic data tomorrow. These events should be markets movers and have a noticeable impact on the Dollar.
Meanwhile, the S&P futures are battling their highly psychological 1100 level and the EUR/USD is dealing with 1.50. Additionally, the GBP/USD is approaching 1.65 and gold continues to trade between $1500/oz and 2009 highs. Hence, most of the major investment vehicles are facing psychological barriers, highlighting the significance of the moment. Fortunately for crude, the technicals of its correlations continue to support a weaker Dollar and an uptrend in equities and commodities. However, we all know how quickly markets can turn, so investors should keep a close eye not only on the behavior of crude, but its correlations as well considering the psychologicals markets are encountering.
Technically speaking, we previously highlighted the importance of crude's breakout above our top-tier downtrend line along with the psychological $75/bbl and August highs. Crude's breakout follows two months of heavy consolidation, meaning the futures could be headed for more substantial gains over the near term. Of course, this will naturally depend on the performance of the Dollar and equities. We can't form any noteworthy downtrend lines at the moment, meaning crude's topside barriers are intraday highs along with $80/bbl and our new 3rd tier uptrend line. As for the downside, crude has several current and potential uptrend lines along with 10/19, 10/16, and 10/15 lows, $75/bbl and August highs.
Resistances: $79.03/bbl, $79.72/bbl, $80.02/bbl
Supports: $78.26/bbl, $77.74/bbl, $77.05/bbl, $76.81/bbl, $75/bbl
Psychological: $80/bbl, $75/bbl