Crude futures have made an encouraging movement by stepping over and consolidating above our previous 3rd tire downtrend line. However, crude is currently topping out just beneath the psychological $75/bbl and previous 2009 highs. Meanwhile, crude continues to climb higher while setting continual higher lows on the back of a broad-based Dollar weakness. Crude's ascent has ignored negatively mixed global econ data, and is clearly being driven by the prospect of increased export demand derived from a weak Greenback. In the process crude is testing our final 3rd tier downtrend line which runs through August highs. A pop past our fresh 3rd tier downtrend line could yield accelerated near-term gains in crude. The positive development in crude reflects the EUR/USD's climb beyond its own 3rd tier downtrend line. Therefore, crude's topside technical barriers are wearing thin and the probability of a breakout has increased considerably. As for the downside, crude has multiple uptrend lines serving as technical cushions along with 10/12 and 10/9 lows. Additionally, the psychological $70/bbl is now working in favor of crude's uptrend.
As with the rest of the markets, crude's near-term movements will likely depend upon the outcome of upcoming Q3 earnings and U.S. econ data, most notably tomorrows Retail Sales numbers. Retail Sales data helps gauge the overall health of U.S. consumption. Since crude has risen recently despite weak consumption data points, better than expected Retail Sales numbers could help boost crude to new 2009 highs. Meanwhile, investors should continue to keep a close eye on behavior of the Greenback, especially the EUR/USD. A topside breakout in the EUR/USD could fuel fresh gains in gold, thereby bringing crude futures along for the ride. In all, the behavior of crude's correlations and the thinning topside technical barriers give us ample reasons to be positive as far as crude's outlook is concerned.
Resistances: $723.64/bbl, $73.93/bbl, $74.56/bbl, $75.06/bbl, $75.49/bbl, $75.86/bbl
Supports: $73.04/bbl, $72.84/bbl, $72.23/bbl, $71.67/bbl, $71.29/bbl
Psychological: $75/bbl, $70//bbl