Crude: Capped below weekly resistance?

• Crude up almost 2% this week

• Watch out for EIA report & Fed decision

• Weekly resistance at $83.64
  

• Possible bearish scenario on H4

• Key levels of interest at $81.25

Our focus falls on US crude oil which is currently hovering around levels not seen in over four months!

The global commodity is up almost 2% this week thanks to geopolitical tensions, Iraq’s pledge to cut crude exports, and the American Petroleum Institute (API) reporting a fall in US crude stockpiles.

Watch this space because more volatility could be on the cards due to the incoming Energy Information Administration (EIA) report and highly anticipated Fed rate decision. 

While the central bank is widely expected to leave rates unchanged, all eyes will be on the dot projection and Powell’s press conference for clues on rate cut timings.

• Oil prices could extend gains if the central bank strikes a dovish tone and signals that three rate cuts are still on the cards in 2024.

• However, if the Fed sounds more hawkish than expected, signaling that US rates will remain higher for longer – oil bears may enter the scene as the dollar appreciates.

Looking at the technical picture, crude oil is currently busy with a strong impulse wave that exploded out of a previous slow and steady uptrend.

The price almost reached a weekly resistance level. This might create a short opportunity on the lower time frames.

On the 4-hour chart, an extended uptrend can be seen with a correction wave in progress. The price is close to the weekly resistance level and the manual trendline has been broken. The longer price cycle Moving Average Convergence Divergence (MACD) Oscillators is still bullish, but the signal line has been broken and this might hint at a possible overbought scenario. A market that is in an overbought state may well slow down and then a possible reversal can be on the books.

This will need to be confirmed by a lower top and then a lower bottom.

If this does happen, a possible scenario can be seen in the chart below.

When the price reaches the $81.25 level, a possible short scenario will become feasible.

Attaching a modified Fibonacci tool to the trigger level at $81.25 and dragging it above the weekly resistance level at $83.80, four conservative targets can be established:

• First target at $80.22

• Second target at $79.71

• Third price target at $78.69

• Fourth and last price target at $77.41

If the price breaks past $83.80, this opportunity is no longer valid.