July West Texas Intermediate crude oil futures rose more than 4% late in Friday’s session, riding a bullish wave of news as U.S. gasoline prices hit a record high and that China seemed ready to ease restrictions in the event of a pandemic.
Although the market is still trading lower for the week, price action suggests there could be upside potential at close or early next week, with bullish traders celebrating a rare combination of news related to both supply and demand.
Oil traders ignore weak US economic data
While reacting positively to supply and demand news, oil traders shrugged off data showing U.S. import prices were surprisingly stable in April as lower oil costs offset gains in food commodities. et al., another sign that inflation has probably peaked.
In addition, other data from the University of Michigan showed its preliminary reading of consumer sentiment for early May had deteriorated to its lowest level since August 2011 as inflation concerns persisted.
Import price data is outdated and, more importantly, energy costs are up in May. Second, consumer confidence could decline further due to persistent inflation. This could lead to lower retail spending or even less travel, indicating a slowing economy.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade at $109.77 will reaffirm the uptrend with the main high at $110.07 the next target. A move to $96.93 will change the main downtrend.
The short-term range is $116.43-$88.53. The market is currently trading on the strong side of its retracement zone at $105.77 to $102.48, making it a support.
The direction of July WTI Crude Oil towards Friday’s close will be determined by the reaction of traders at $105.77.
A sustained move above $105.77 in late trading on Friday will signal that buying is gaining strength. If that creates enough upside momentum on the close, we could see a breakout on the pair’s major highs at $109.77 and $110.07. The latter is the trigger point for an upward acceleration.
A sustained move below $105.77 will signal the return of the sellers. This move will also indicate that traders are still selling rallies. However, it will take a lot of pressure to crack this market on Friday night as support is lined up at $102.48, $100.96 and $98.88.