Crude Oil weekly chart
• Since the surge in crude began in earnest from the mid $20’s in the 2nd half of 2003 the 200 week moving average has become a very pivotal support/resistance area.
• After the rally pushed higher in 2003 the first re-test took place in Jan. 2007 around the $50 level. That held decisively and became the platform for the next surge which culminated in the $147+ peak in July 2008.
• Then in October 2008 it was tested again (Having been above on a weekly closing basis for over 5 years) The 200 week moving average was at $74.71. We got a weekly close below and the rest, as they say, is history as crude more than halved in value in the subsequent 2 months.
• The 200 week moving average now stands at $74.65 (Amazingly almost identical to where it was last October). We went close to it in June and actually traded marginally above it last week and this week. The bias has been to see Crude trade lower to the mid to low $50’s with a danger of lower still and indeed it has traded as low as the high $50’s. Below 458 would suggest that even as low as the low $40’s would be a danger.
• However this re-test of the 200 week is ominous. While it holds on a weekly closing basis then lower levels would still be on the cards in the weeks and months ahead. However a weekly close above would suggest a whole new dynamic is now in play and that higher levels than we previously thought could be on the cards.
• Crude has been below the 200 week moving average just under a year compared to the 5 years above in 2008 so we would not anticipate a move of the magnitude seen to the downside last year. However if we see this close we would have to expect, at a minimum, that this move could extend as far as $85 to $90 at least with interim resistance around $78.50. This development, if it occurs may well have implications for other markets that seen to trade closely to the Oil price.
Crude Oil and EURUSD
• This relationship has reasserted itself quite closely this year. A break higher on crude as described above would suggest a strong probability that we could see EURUSD re-test the 1.4720 December highs. Break of that latter level would suggest that a return towards 1.60 and above could be on the cards as per medium-term view. As a consequence a break on this big Crude level would cast strong doubts about seeing the deeper near-term correction lower in EURUSD below 1.40 that we have been anticipating.
Crude Oil and EURJPY
• The “risk” correlation also seems close here and a gap is already opening up between the Oil price move and EURJPY suggesting higher levels in EURJPY.
Crude Oil stands at a major pivot…break or hold????
Linear Mode
