A Quick Look At Crude Oil And The US Dollar

I posted yesterday about “Crude Oil and the S&P 500 Index” but let’s take a look now at Crude Oil and the US Dollar both on the weekly timeframe.

Crude Oil (WTIC):

Crude Oil seems to be completing a “Rounded Reversal” pattern that I’ve been highlighting for some time now, and we’re finally getting a rally of the significant positive momentum divergence that has been forming (particularly on the daily charts).

As it stands now, we’re at key potential resistance via the 20 week EMA, but if price clears this level, there is ‘open air’ or open room to make a play for $70 per barrel.  Again, this is just taking a chart view on this possibility, not including fundamental or other considerations.  If the dollar continues to weaken, crude oil prices (and that of many commodities) will continue to rise.  A little inflation would be a good thing in an environment of deflation virtually across the board.

US Dollar Index:

The Dollar Index appears quite bearish in its weekly chart, particularly after having formed a doji (and sort of evening star pattern) at its recent price highs at the $89 level.  Look closely to see that a distinct negative momentum divergence formed on these highs as well.

The “angle of ascent” (I drew trendlines around it) ‘feels’ odd - almost corrective in nature, and that a down-move seems the natural pathway to work off that rise.  It almost feels like an “AB = CD” Measured Move pattern is forming, whose targets would be roughly the $78 index area.

There is potential support about the $81.50 level via the rising 50 week EMA, but if that support level gets taken out, then we would have similar ‘open space’ on the weekly chart to the downside as we do upside in Crude Oil.

We’re sitting now on the 38.2% Fibonacci retracement from the 2008 lows to the 2009 highs, and the 50% comes in at roughly $80.50, while the 61.8% retracement is at the $78.30 level.  The $79 level also reflects prior resistance from the September price swing, which should be expected to act as (at least) temporary support.

Keep watching these charts closely for additional clues.

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