Crude experienced a solid up-bar yesterday on rising volume, strengthening crude towards $72/bbl and our 3rd tier downtrend line. Crude has set consecutive higher lows, a positive development technically. Crude's flirtation with our 3rd tier downtrend line is encouraged and we have created a 4th tier to compensate for recent upward movements. Crude's strength comes despite weakness in the GBP/USD. The EUR/USD and gold are stabilizing, indicating the Dollar's appreciation against the Pound may not accurately represent the broad-based state of the Greenback. Crude futures are finding strength in the knowledge that gold's breakout likely implies a continued medium-term depreciation of the Dollar. Furthermore, weekly crude inventories came in light while the S&P futures are staring down previous 2009 highs. Hence, recent behavior of crude's correlations creates a positive environment for the futures to accelerate to the topside should next week's global econ data and Q3 earnings top analyst expectations.
Despite the positive technical developments in crude and its correlations, there remain a few obstacles to overcome to the topside. These include our 3rd and fresh 4th tier downtrend lines along with 9/17 highs and the psychological $75/bbl. As for the downside, crude has technical cushions in the form of our multiple uptrend lines, 10/9 and 10/8 lows, and the psychological $70/bbl level. The $70/bbl has a strong gravitational pull, meaning crude will likely need a considerable boost in buy-side activity to overcome its topside technical barriers. Next week is chalk full of important data releases and Q3 earnings, meaning volatility could increase across the marketplace following Monday's banking holiday.
Resistances: $72.04/bbl, $72.32/bbl, $72.84/bbl, $73.18/bbl, $73.56/bbl, $74.33/bbl
Supports: $71.37/bbl, $70.93/bbl, $70.48/bbl, $69.79/bbl, $69.26/bbl
Psychological: $75/bbl, $70//bbl, $65/bbl