U.S. West Texas Intermediate crude oil futures are trading sharply lower as a stronger U.S. Dollar reduced foreign demand for the dollar-denominated commodity. Crude oil was also pressured by profit-taking as some bullish traders began reducing long positions ahead of the March 4 OPEC+ meeting.
At 21:47 GMT, April WTI crude oil futures are trading $61.50, down $2.03 or -3.20%.
The U.S. Dollar rose as U.S. government bond yields held near one-year highs, making dollar-priced oil more expensive for holders of other currencies. Next week, OPEC+ meets to discuss returning more supply to the market beginning in April.
Essentially, crude oil is trading higher than pre-pandemic levels, while demand continues to lag. Therefore, there has to be a correction because the market is ahead of the fundamentals.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $63.81 will signal a resumption of the uptrend. The main trend will change to down on a move through $57.31.
The minor trend is also up. A trade through $58.60 will change the minor trend to down. This will also shift momentum to the downside.
The first minor range is $57.31 to $63.81. Its 50% level at $60.56 is the first downside target. Since the main trend is up, we could see a technical bounce on the first test of this level.
The second minor range is $51.53 to $63.81. Its retracement zone at $57.67 to $56.22 is a strong support area.
The selling pressure on Friday suggests sellers will take a run at $60.56 early next week. Watch for buyers on the first test of this level. They will attempt to retracement The Thursday to Friday decline.
If $60.56 fails then look for an acceleration to the downside with $58.60 the next potential downside target price.
The uptrend will resume on a trade through $63.81, but don’t look for an acceleration to the upside unless buyers can overcome the October 22, 2018 main top at $64.26 with conviction.
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This article was originally posted on FX Empire