Crude oil had a bullish week last week (w/c 10th July), which was in stark contrast to how the month began. In a month of large inventory draws and a weak US dollar, rising oil prices could have been expected.

However, it has been a complex month, with generally bearish news, which included rising OPEC exports, increasing shale output, and a rising rig count. With this background of negative news, oil sold off in the first week of July, despite large inventory draws.

As we entered July’s second week, Janet Yellen was the focus of the financial news. The testimony from the federal reserve was rotten for the US dollar. They expressed strong concerns for the impact of persistent low inflation on the green back, and expectations for a rate hike were lowered. This sent the USD into decline, which provided further support for oil prices.

To add to this, whilst rig counts continued to rise, there were signs of a slow down, as the addition of rigs reached its lowest in five years.

Chart summary of last weeks action (w/c 10th July 2017). Bullish trend staying above VWAP.

July so far has seen a large swing down then up, on mixed news. There is nothing new here, and a familiar sight for oil traders. One thing that did make last weeks swing up a little different, is we broke out up above some key resistance.

There has been a down-trend line, which was first formed a few months ago. The oil price approached this level a few times last week, then eventually broke out up above, with large volume.

Traders will be watching this breakout to see if it can hold above, for an indication of more upward momentum for the week to come.

Longer term crude oil chart, shows prce broke above resistance level last week (upper dashed blue line)

UPDATE 21:15 UK Time : Looking at the charts at the close of the US session today, we did continue the rally in the early European morning, but by the open of the US we began to pullback significantly.

We are now testing the upward trend line from last week (see chart below, in yellow). This gives an opportunity for some good risk/reward trades. Going long with stops below the trend line, and going short if we break below.

Four hour chart of crude oil, showing yellow upward trend line.

About the author

Trading and Investment

Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

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