Crude oil has been trending lower with its lower highs and lower lows inside an ascending channel pattern on the 1-hour time frame. Price is down to support and looks ready for a pullback.

The mid-channel area of interest near the 38.2% Fibonacci retracement level at $56.80 per barrel appears to be holding as resistance. A larger pullback could last until the top of the channel at $57.54 per barrel or the 50% level that’s close to the 100 SMA dynamic inflection point.

On the subject of moving averages, the 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the downtrend is more likely to gain traction than to reverse. The gap between the indicators is widening to reflect increased bearish momentum.

RSI is already turning lower without hitting the overbought zone yet, suggesting that sellers are eager to return. Stochastic has already made it to the overbought zone and might be ready to turn lower, so price could follow suit. In that case, crude oil could retreat to the swing low at $55.61 per barrel or the very bottom of the channel closer to $55.50 per barrel.

Optimism around the China-Japan trade deal is being seen as one of the factors propping up crude oil these days. This comes after Trump reiterated that they wouldn’t accept a “bad deal” from China, prompting many to fear that another set of trade restrictions on the commodity might be announced. Then again, Trump hinted that a deal with Beijing could happen “sooner than you think” so mixed signals are in play.

Meanwhile, tensions in the Middle East could also provide some support as attacks might cripple production in key nations like Iran and Saudi Arabia. Then again, the kingdom has boosted its production over the past weeks in order to make up for the output lost in an earlier attack.