Crude futures have climbed back above their $80/bbl psychological level again and are currently staring down previous 2009 highs. Weekly inventories just printed nearly 6 mill barrels below analyst expectations, indicating a pickup in demand for and consumption of crude. The pullback in supply is providing a positive catalyst for crude, creating an environment supportive of another breakout should correlative activity follow through. Crude's correlations are behaving thus far, with a broad based depreciation in the Dollar to go along with gold's monster topside breakout towards $1100/oz. Furthermore, the S&P futures are climbing past their psychological 1050 level despite both the Non-Farm Employment Change and Non-Manufacturing PMI data points coming in below analyst expectations. Speaking of which, these negative econ data points from the U.S. could be what's holding back crude from setting fresh 2009 highs right now.However, despite today's disappointing stream of U.S. data, both U.S. and British Manufacturing PMI numbers topped expectations earlier this week. The pick-up in manufacturing is likely an element bolstering demand for and consumption of crude. Meanwhile, all eyes will be on the central banks over the next 24 hours. The Fed, ECB, and BoE will all make monetary policy decisions, meaning volatility in FX markets could increase over the next couple trading sessions. Since the price of crude is being driven by the value of the Dollar, the Greenback's reaction to upcoming monetary policy could have a sizable impact on near-term movements in crude. Hence, investors should monitor any technical breakouts or pullbacks in the EUR/USD and GBP/USD. Fortunately for bulls, gold's aggressive topside movements yesterday could imply a corresponding depreciation in the Dollar. If this is the case, then crude may find its catalyst to set new yearly highs.
Technically speaking, crude's topside barriers are wearing thin. The futures are trying to take a step above our 2nd tier downtrend line right now, and the only foreseeable topside obstacles beyond our 2nd tier are previous 2009 highs and the psychological $85/bbl level. As for the downside, crude has multiple uptrend lines serving as technical cushions along with 10/27 and 11/3 lows. Meanwhile, the $80/bbl level could turn into a psychological support should crude create more topside separation.
Resistances: $80.96/bbl, $81.52/bbl, $81.98/bbl
Supports: $79.45/bbl, $78.63/bbl, $77.62/bbl, $76.89/bbl, $76.63/bbl
Psychological: $80/bbl, $85/bbl, $75/bbl