The recent bullish trend for crude oil, appears to be running into a stubborn area of price resistance on the daily chart in the $104.50 per barrel area, the same level which saw the commodity sell of sharply back in early March. Last week’s strong gains for oil were accompanied by strong and rising volume, before ending the week with a small doji candle and shooting star, suggesting weakness at this level. This was duly confirmed yesterday with a second weak candle on above average volume, with today’s oil trading session marked with indecision and a further doji candle, with the May futures contract currently trading at $103.56 at the time of writing. The resistance level now in place at $1o4.50 is now key, and for any continuation of the recent bullish trend, this level will have to be breached with strong and rising volumes.
Moving to the volume at price histogram on the left of the chart, the deep level of support now in place is clearly evident in the $100 per barrel area. Above this, the immediate support region is now firmly defined in the $102.50 per barrel area, and provided this remains firm then bullish momentum should continue in the short term.
Tomorrow sees the release of the weekly oil inventories, and as always, these will tend to have a more dramatic effect on the Canadian dollar. The last few weeks have seen forecasts become increasingly wide of market expectation, with last weeks 4m bbls exceeding the forecast of 1.0m bbls by some margin. Previous weeks have seen a similar pattern, with a draw of -2.4m bbls against a build of 1.3m bbls, and all forecasts for March having been wide of the forecast by more than 3m bbls on each occasion. So not an easy item of news to judge, and for intra day oil traders, patience is the name of the game ahead of this release.