Crude oil prices continued to slide despite the market’s risk appetite. WTI crude oil CFDs dropped 79 cents in yesterday’s trading as it closed at $58.05 amid optimism for the US-China Phase One Deal. The Chinese delegation arrived in Washington yesterday as they prepare to sign the deal tomorrow, January 15. There were also reports which reiterated that China will buy up to 200 billion USD worth of US goods in the next four years.
Today, the commodity was also little changed on positive Chinese data. According China’s trade balance report, the country enjoyed a 46.8 billion USD trade surplus in December. This number was higher than the 45.8 billion USD consensus.
These reports should have been bullish for crude oil prices because they both point towards stronger global growth which could translate into sustained demand for oil. However, it would seem that they were not enough for crude oil to find bids in the market. Perhaps today’s crude oil inventories report from the American Petroleum Institute (API) can?
At 9:30 am GMT, the API will release its weekly crude oil inventories report. It is different from the EIA’s report which is due tomorrow. If it shows that inventories dropped last week, it could spark a rally in crude oil prices.
Read our Best Trading Ideas for 2020.
Crude Oil Price Outlook
On the daily time frame, crude oil prices have fallen to support at the rising trend line that I pointed out yesterday. There’s a confluence of support at this price, around the $58.00 handle. Aside from the trend line, the 100 SMA and 200 SMA also seem to coincide in this area.
Crude oil price chart, daily
If support does hold, you can look at the shorter-term time frame on the hourly chart for indications of a potential bounce. By connecting the highs of January 8, January 10, and January 13, we can see that any upside movement on WTI crude oil CFDs will be limited by the falling trend line. The commodity may face resistance around $58.70 where the trend line aligns with the 61.8% Fib level (by drawing the Fibonacci retracement tool from yesterday’s highs to its intraday lows).
However, there may not be enough buyers in today’s trading to spark a pullback on WTI crude oil. A strong bearish close below yesterday’s low could invalidate support at the rising trend line. This means that crude oil prices may drop to their November lows around $55.00.