Crude oil prices are moving lower after President Trump backed away from his proposal to impose a 20% reimbursement fee on all cargo ships exiting the Strait of Hormuz. The idea, which caught markets by surprise yesterday and helped spark a sharp rally in oil prices, has now been shelved. Instead, the administration is shifting its focus toward securing investment commitments in the United States, although exactly how those pledges will be structured, monitored, or enforced remains unclear. The policy reversal has eased some of the geopolitical risk premium that had been priced into crude, leading traders to unwind a portion of yesterday’s gains.
From a technical perspective, the price action is at an important inflection point. The decline has taken crude down to $77.84, a level that coincides with the underside of the broken trendline connecting the series of lower highs from May and June. Yesterday’s rally finally pushed above that trendline, signaling a potential bullish breakout. Today’s decline is now testing that breakout, making this a key area for buyers to defend. Holding above the broken trendline would keep the breakout intact and leave the door open for another push higher.
Also coming into focus is the swing area between $75.99 and $77.10, which acted as resistance on the way up and could now serve as support. For sellers to regain firm control, they need to force the price back below both the broken trendline and this swing area. A sustained move below $75.99 would suggest yesterday’s breakout has failed, shifting the near-term technical bias back to the downside. If that occurs, traders would begin targeting the rising 100-hour moving average, currently near $74.60, as the next key downside objective. Until then, the current pullback can still be viewed as a retest of a newly broken resistance level rather than the start of a broader bearish reversal.
On the topside, traders will be watching the June18 high at $79.18 as close resistance. Stay below would keep the bias more to the downside at least in the short term (with work to do). Moving back above, would give the buyers even more control.
Sellers are making a play but need to get below key levels below to take back more control (in the short term).
This article was written by Greg Michalowski at investinglive.com.
