WTI en route to 65.80 on continued bear pressures below the 21-D SMA

• WTI has been making tracks to the downside with the DXY holding onto the 95 handle.
• Eyes on the US, China and trade wars.

WTI has been making tracks to the downside with the DXY holding onto the 95 handle, albeit on a bear trend on the hourly time frame, falling from the mid-point of the 95 handle. WTI is currently trading at 67.29 from a high of 68.40 and has made a low of 67.22 so far on the session, despite renewed sanctions on Iran and signs of a pickup in crude demand from China.

Casting minds back to Friday's data, the Baker Hughes was showing that the number of U.S. oil rigs dropped by two last week - another bullish factor for oil prices as this was suggesting a modest slowdown in production. At the same time, there are signs of a decline in Iranian crude oil exports and this comes ahead of renewed U.S. sanctions taking effect in November.

Markets are somewhat volatile

Markets are somewhat volatile, and there is a sense that heightened global trade tensions may impact demand for energy which may have contributed to last week's negative performance. China's record trade surplus with U.S. adds fuel to trade war fire as well. With the U.S. imposing tariffs on an additional $200 billion of imports from China, one would expect that there will be further turmoil once the markets start to price in the additional $267 billion that President Trump threatened on Friday, just hours before China reported another record trade surplus with the U.S. In general, commodities are vulnerable and higher rates in the US will only exacerbate the picture for commodities. We have just had a fantastic set of data numbers from the US, (PMIs/nonfarm payrolls&wages), and now markets will turn to this week's PPI and CPI releases that are key. Higher than expected CPI will only underpin the case for higher rates from the Fed - other key U.S. data in the week ahead include the JOLTS jobs, real weekly earnings, retail sales and industrial production. Eyes will also be on China's economy and it is a busy week - we already have seen the CPI and PPI; Now eyes turn to retail sales, IP and urban investment due on Friday, while credit and lending data are also due this week - in any case, the downside in China's economy and the divergence between China, the US and the majority of developed nations will underpin the greenback  - however, higher values in the greenback do not always translate into lower prices for oil and, if anything, we have been seeing more of a positive correlation in oil and the dollar. 

WTI levels

The 61.8% Fibonacci retracement level from the mid-August to early-September bull move continues to support but the daily 21-D SMA is now under pressure. The target to the upside is located near 69.30 August 24 high while the downside is open to 65.80 on continued bear pressures below the 21-D SMA.

 “WTI Crude gains are likely to be limited with first resistance at 6800/10 & we topped exactly here on Friday. If a break higher is seen we target a selling opportunity at 6860/70. Stop above 6900. Holding below 6800 keeps the outlook negative targeting 6755/45 & the low at 6686, just above our next downside target of 6680/75. This is minor short-term Fibonacci support at so it is not a surprise that it held but is unlikely to hold for long. A break lower targets 6650, 6610/00 & perhaps as far as 6570/60.” - explained Jason Sen at DayTradeIdeas.com.