WTI crude oil is retreating from the long-term channel resistance and has fallen through short-term support zones to indicate that a larger dip is in the works. Price could be due for another test of the ascending channel support around $70 per barrel before resuming the climb.
The 100 SMA is above the longer-term 200 SMA on this daily time frame, confirming that the path of least resistance is to the upside. In other words, the uptrend is more likely to resume than to reverse. The gap between the moving averages is narrowing to signal slowing bullish momentum, though. Still, the 100 SMA lines up with the channel bottom to add to its strength as a floor and the 200 SMA is just close by to add another barrier.
Stochastic is heading south so crude oil might follow suit while bearish pressure is in play. This could keep WTI crude oil on track towards testing the channel support until the oscillator hits oversold territory and turns back up to signal that bulls are back in the game. RSI is also heading lower to indicate that selling pressure is in play.
WTI crude oil slumped along with most other commodities in the past 24 hours due to the surge in risk aversion. Stocks and cryptocurrencies have been strongest hit, with Black Crack also reeling due to expectations of weaker energy demand. The EIA downgraded its forecast for global crude oil demand by 60K barrels per day this year, although it upgraded estimates for 2019.
Still, expectations of more Fed tightening led to a weaker business and consumer outlook, particularly set against the backdrop of trade tensions and feeble inflation. This led traders to dump their riskier holdings like commodities, although oil could see some upside once the fresh batch of US sanctions on Iran are in place next month.