Crude futures are heading south of their highly psychological $80/bbl level after failing to close back above yesterday. There's not much new news concerning crude besides Monday's MEND ceasefire and OPEC announcing a potential ceiling of $100/bbl before increasing production. Therefore, it seems crude is opting to follow the S&P futures lower and the Greenback higher. Investors have received a stream of negatively mixed U.S. econ data over the past 24 hours. Yesterday's negative CB Consumer Confidence reading further supports the belief that U.S. consumption is still in a funk, a negative sign regarding the outlook for aggregate demand for crude. Additionally, today's DGO data paints a mixed picture since the headline number came in two basis points below expectations. The low headline DGO reading implies auto purchases still have a hangover from the buying spree resulting from the U.S. government's 'cash-for-clunkers' program. Less autos on the road implies less consumption of crude, thereby serving as a negative catalyst for the price of crude.
Meanwhile, the Greenback has logged sizable gains against Euro, and gold is stumbling with broad-based strength in the Dollar. A stronger Dollar makes U.S. crude a less attractive important, thereby decreasing the outlook for aggregate demand while driving price lower. Therefore, investors should keep a close eye on the Dollar should the pullback in U.S. equities accelerate further since the two are negatively correlated.
Technically speaking, crude is presently fighting to stay above 10/21 and 10/16 lows. Beneath levels, the next foreseeable technical cushions are 10/15 lows and the psychological $75/bbl level. As for the topside, the $80/bbl should serve as a technical barrier along with 10/20 and previous October highs.
Resistances: $78.67/bbl, $79.24/bbl, $79.82/bbl, $80.44/bbl, $81.48/bbl
Supports: $77.66/bbl, $77.30/bbl, $76.80/bbl, $75.74/bbl, $74.99/bbl
Psychological: $80/bbl, $75/bbl