Oil bulls were back in force to end the 2nd quarter, with the lead month August contract rising by over 9%, as European leaders announced an agreement to aid struggling banks in Spain and Italy. This news sparked a move back into "risk" assets such as commodities, and especially Crude Oil. The U.S. Dollar fell sharply, adding to day's bullish sentiment for commodities. Technical traders note that buy stops may have been triggered once the August contract moved above resistance at 81.20, adding momentum to the buying frenzy. Some additional support may have come from concerns about future Oil supplies, as the European embargo against Oil purchases from Iran is set to begin. An Oil workers strike in Norway is lending additional bullish momentum to Brent futures. Though Friday's rally was impressive, current Oil inventories are more than ample, and we would need to see some sustained increases in global demand to put more credence into the belief that near-term lows are now in place.
Technical Notes
Looking at the daily continuation chart for Crude Oil futures, we notice what appears to be a double-bottom formation, as the recent selloff failed to test the October 2011 lows near 75.00 before Friday's sharp recovery. Prices are now once again trading above the 20-day moving average for the first time since early May and may find further upside momentum as weak bears exit the market. The 14-day RSI has moved from oversold levels to a neutral stance, with a current reading of 48.62. Last Thursday's low of 77.28 looks to be support for August Crude, with resistance now seen at 85.60.
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