WTI crude oil has formed higher lows and higher highs to trend inside a rising channel on the 1-hour time frame. Price is currently testing the channel top and might be due to retreat to nearby support levels.
The Fibonacci retracement tool shows where buyers might be waiting. The 50% level is around the mid-channel area of interest to add to its strength as support while the 61.8% Fib lines up with the 100 SMA dynamic support.
On the subject of moving averages, the 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the uptrend is more likely to resume than to reverse. A shallow pullback could already find buyers at the 38.2% Fib or $61.39 per barrel mark while a large correction could reach the 200 SMA or channel bottom closer to the $60 per barrel major psychological mark.
Stochastic is already indicating overbought conditions or exhaustion among buyers, and turning lower would confirm that the correction is taking hold. Similarly RSI is in the overbought zone to signal exhaustion among buyers and looks bound to head south soon.
Crude oil price action could hinge mostly on the inventory reports from the American Petroleum Institute and the Energy Information Administration later in the week. Large reductions were reported in the earlier weeks, so another draw could mean more upside for the commodity.
Apart from that, Powell’s upcoming testimony in Congress could also impact overall market sentiment and commodity price action. He is expected to assure market watchers that the rise in bond yields and stronger inflation are nothing to worry about, which lowers the odds of tightening anytime soon. In that case, the US dollar could take a hit while higher-yielding assets like crude oil could continue to climb.