US Crude Oil traded lower today despite reports of US considering using military force in Syria after the local government has been accused of using chemical weapons against its citizenry. However, this worsening of Middle Eastern political stability does not seem to affect Crude Prices that much, even though such unrest tended to prompt concerns of crude supply in the past, resulting in higher Crude prices.
Interestingly, this decline came on the back of the strong rally seen last week, which makes today’s decline all the more peculiar if we consider that bullish sentiment is supposed to be strong right now. Furthermore, this pullback happened when prices have yet to reach the 108.50 significant resistance, suggesting that underlying bulls are not strong. Looking back, perhaps we should not expect bulls to be strong to begin with. Prices rallied mostly due to last Friday’s Housing Data miss, which pushed yields lower and Gold higher. Other than that, it is hard to see any strong reason why Oil should trade higher. 104.0 itself is not a strong support level, with 103.0 the more important one. This lead us to believe that the rebound at 104.0 which resulted in the test of Senkou Span B would not have been broken if not for the housing data rally. Considering that the rally appears to be a one-off move, which does not change what the broad market thinks about Fed’s tapering chances, it is likely that crude oil will continue its bearish trajectory soon.
From a technical perspective, 106.0 round figure and confluence with Senkou Span A would provide some support against any short-term bearish movement. Nonetheless, if the Kumo perimeter has been breached, we could see acceleration towards 104.0 once again, and the flat Senkou Span B may draw prices lower even faster, potentially resulting in a Kumo Breakout especially if API and DOE Inventory numbers support a bearish move on Tuesday and Wednesday respectively.
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