As always, Wednesday is an interesting day for oil traders and speculators with the weekly oil inventories release due later, and one which is forecasting a draw once again of -1.9 against a previous of -1.1, which if maintained would be the fourth consecutive in a row at the Cushing hub and so provide a further boost to the current bullish sentiment for the commodity.
However, whilst the fundamentals and the US dollar will play their part, it is the technical picture which is becoming increasingly important and in particular, the various levels which are now baked into the daily chart and denoted by the accumulation and distribution indicator which delivers these automatically. And in simple terms, the wider the line then the greater the strength of such levels, and the strength is further reinforced where we have clusters of these lines. And on the daily chart we have one such cluster which was breached in early trading at the $58 per barrel region. Here we have two such levels, one denoted in blue and the other in red, and combining to present a doubly strong platform of support to the current rally higher with the WTI contract currently trading at $59.22 per barrel at the time of writing. Deeper still we have a further support platform at $56 per barrel which came into play early in the month helping to prevent a further decline in price following the sharp move lower on the 2nd July.
Ahead lies the third of our key levels acting as a ceiling of resistance at $60.20 per barrel and denoted with the red dashed line. This level has come into play several times in the last few weeks, most recently towards the end of June. And the question now is whether it will do so again and cap the current rally and this is where volume steps in and should we see a clean wide spread up candle build today on good volume, this should provide the launchpad for an attack of the resistance at $60.20 per barrel which once breached would see oil climb higher towards the volume point of control at $62.70 per barrel. In addition, note the lighter volume on the volume histogram to the right of the chart which will assist the move higher once the $60.20 per barrel level is taken out. This would then help to push oil on towards $61 per barrel and beyond. And for forex traders, there could be a double whammy as we have the BOC ahead of the oil inventories, so expect plenty of fireworks in the Canadian dollar. And if that were not enough these two evens are followed later in the day by the FOMC!