By FXEmpire.com
The Light Sweet Crude markets initially fell during the Monday session, only to turn around and pop during the later hours of the session. The oil markets have been held hostage by the situation involving the Iranians and the West as the nuclear program standoff continues between the two. In all practicality, it is very unlikely that the Iranians will block the Strait of Hormuz, but this threat is what started all of this in the marketplace. Many traders are starting to wonder whether or not the Israelis are going to act on their own, and this gets the markets nervous.
Leaving the Middle East alone, there is a significant amount of demand coming out of the emerging markets at the moment. True, the United States is lagging a bit as far as consumption lately, but the Chinese and Indians seem set on making up the difference. With the announcement of a slightly stronger than expected PMI number out of China over the weekend, it suggests that the Chinese are moving right along, and this would mean continued demand out of that large market.
Looking at the charts, the $104 area is still significant, and should continue to support the market. However, what was once a clear flag now looks more and more like a descending channel – a very bearish sign. Because of this, we have to be cognizant of the barriers in order to look for some kind of breakout in either direction. The channel itself is a bit tight, but when it gives it should lead the way for the immediate future in this market.
The Dollar keeps gaining against many other currencies, and as a result the value of it grows. This tends to drive the price down for oil as the stronger Dollar means that it takes less of them to pay for a barrel. With today’s action, we actually like the long side of this trade, but need to see the top of the descending channel broken in order to get involved. Selling is still hard for us to do until we get below the $95 level.
Oil Forecast April 3, 2012, Technical Analysis
Originally posted here
