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  • Trendline support  broken as were the accumulation of 200,50 and 20 Daily moving averages.
  • WTI bears have eyes for a full retracement back to the year’s lows around  50.50.

West Texas Intermediate crude is falling at the start of the month, extending the downside from the 16th September peak in the 63 handle (knee-jerk spike to Suadi oil-facility attack). Today, the spot prices in WTI have travelled from a high of $54.84 to a low of $53.26, -1.46% on the day so far.  

WTI futures lost 75 cents, or 1.4%, at $53.32 a barrel on the New York Mercantile Exchange after trading as high as $54.84. However, they dropped on the day as concerns of a global economic slowdown following an OPEC production report as well as the  U.S. manufacturing activity slowing to its lowest level in over a decade.

The 10-year low in the data  comes in at  47.8, well below the 50 breakeven level. Analysts at ING pointed out that the index  was below every single forecast in the market with the production, export orders and employment components looking particularly weak. “These figures suggest that further output declines are likely and point to downside risks for Friday’s US jobs report.”

The Federal Reserve is now expected to respond

The Federal Reserve is now expected to respond and join the circuit of central banks needing to slash rates further. The major concern is the markets is how little room there is left to manoeuvre and thus bring in the need for unconventional measures- such as quantitative easing again. Indeed, the trade war saga and various geopolitical risks are a weight to the price of oil.  

“CTAs have continued to add shorts across the energy complex as firming downside trend bets add to the bearish sentiment in crudes, heating oil and natural gas,” analysts at TD Securities explained:

“Despite sky-high geopolitical uncertainty in the region, with Iran continuing to expand its uranium enrichment program and as the US sends additional troops and defense systems to Saudi, the prospect of lower demand growth and continued strength in supply is keeping the market comfortable in looking past the risks of further disruptions for now.”

WTI levels

Trendline support was broken as were the accumulation of 200,50 and 20 Daily moving averages. Bears have moved further to test the vicinity of the  78.6% Fibonacci level (a reenactment target of the August rally) in the mid 53 handle and have eyes for a full retracement back to the year’s lows around  50.50. On a move higher, for the reversal and trend to be convincing,  bulls will need to get back above the 21-DMA to open prospects for the 59 handle that will then bring in the April highs at 66.58 on the wide as a target.