Article by ForexTime

The weekly chart of crude oil futures prices is the best reflection of what is currently happening.  Prices continue to fall as the market prices in heavy production increases seen during the spring and summer in North Dakotas Bakken Shale.  Production has climbed to 1 million barrels a day from nearly zero 5-years ago.

The dollar has also contributed to the decline in crude oil prices.  Oil is priced in US dollars which means as the value of the dollar increases the value of crude oil will decrease at that rate.  The dollar is gaining strength as U.S. interest rates increase relative to foreign interest rates.  The dollar index increased by 1% this week and is up nearly 4% since early July.

U.S. economic data showed some strength with housing numbers showing the most impressive results.  U.S. existing home sales beat estimates with a 2.4% July rise to a 5.15 million rate from a 5.03 million clip in June to leave a gradual four-month climb from a 4.590 million two-year low in March.

Traders were also eyeing two speeches Friday one by Fed Chair Janet Yellen and the other by ECB President Mario Draghi, both at Jackson Hole Wyoming.  Yellens speech was more of the same, which means that rates will remain low, with the likelihood of a rate hike in the 2^nd or 3^rd quarters of 2015.

Crude prices broke through weekly trend line support, and are poised to test horizontal trend line support near $90.70.  Resistance is seen near former support at $95.00.  Momentum has turned negative with the MACD (moving average convergence divergence) index generating a sell signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.  The RSI moved closer to oversold levels and is printing near 35, which is the bottom of the neutral range.

Article by ForexTime

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