WTI Crude Oil is Taking Advantage of the Weakening U.S. Dollar

Following the sharp drop in the oil prices after Organization of the Petroleum Exporting Countries (OPEC) announced the big production cuts, the oil is still weighed down by worries that the output cut might not be big enough to rebalance the market. OPEC and 11 non-OPEC leading producer countries including Russia agreed to cut 1.8 million barrels a day for the first half of the year. Last week OPEC announced that is considering extending the output cut agreement until the end of 2017, six more months, giving a temporary floor to the falling oil prices.

Even though the concerns didn't calm down and traders are looking forward to API weekly crude oil stock coming out later in the day, the weakening U.S. dollar prevented the oil prices from plunging further. The U.S. President Donald Trump started presenting his legislation agenda to the congress and the first healthcare bill reform found many obstacles. Finally, the healthcare bill, which would repeal Obamacare, has not got enough votes to pass raising concerns the Trump's administration might not be able to pass the other scheduled reforms for tax cuts and infrastructure spending. The concerns affected strongly the greenback which sank to the lowest in 4-months against the basket of the six-major rivals, at 98.65. The next reform that will be presented in the market is the highly significance corporate tax cuts.

A weakening dollar favours all the commodities as the foreign traders taking this as an opportunity to buy gold, crude or other less risk-appetite investments for their portfolios. Moreover, a weak dollar makes the crude oil cheaper for countries using other currencies which increase its demand, helping the oversupply exist in the market now.

West Texas Intermediate – Technical Outlook

The WTI crude oil tested and bounced back from the medium-term ascending trend line which is holding since April 2016, over the last hours. The oil plummeted to a fresh four-month low at $47.15 support barrier. Also, the price fell more than 14% over the last twenty days and created an aggressive run to the downside. Over the last year, the price is developing in an ascending move, however, if the price slips below the diagonal line, it will expose towards the $45.20 support level. On the other hand, the retracement of the price may give the opportunity of covering some of its losses hitting the $50.15 resistance barrier.

From the technical point of view, the price is trading below the three SMAs (50, 100 and 200 SMAs) on the daily chart and a bearish crossover within the 50 and 100 whilst on the 4-hour timeframe, RSI and MACD are rising with strong momentum. On the daily timeframe, the MACD oscillator is moving below the zero line but is rising. Also, the RSI indicator after the pullback on the overbought path it lies higher.

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