Crude oil’s glory extending into this week, where crude neared the end of the week higher by almost 4.0% ending higher for the fourth week in a row and setting new highs for the year. The dollar that continued its free fall was once again a dominant factor in supporting the upside gains. The dollar managed to limit its losses on Friday, yet still it lingers at its lowest levels in almost a year. The slumping dollar in the past period has fueled commodities gains as that seen in oil and precious metals; oil found further support from corporate earnings which continue to exceed expectations, which supporting the risk appetite and helping investors eye continuous recovery as the worst has passed. On Friday, oil declined slightly following the dollar’s appreciation; the dollar index opened on Friday at 75.06 reaching its highest around 75.35 and currently is trading around 75.32. Risk aversion was senses in the market after the sentiment shock following the unexpected contraction for the UK economy. The royal economy was the first of the leading nations to announce their third quarter GDP and investors were anxious and anticipating expansion yet the economy did not manage to pull it through contracting by 0.4% on the quarter. That awakened lingering fears that the road ahead is still bumpy and at this pace growth will resume rather anemic well into next year. On that back of that and the dollar’s gained strength oil traded within a tight range on Friday and was trading around $81.37 at the hour of the report after opening at 81.24. The signs continued to be conflicting again this week, whether it was mixed earnings, volatile dollar, or even jittery investors are were printing the economic outlook and that was a major contributing factor. Though Friday’s GDP from UK was a shock earlier in the week it was the Chinese shock, were though the economy expanded by 8.9% still investors saw they missed expectation. That was merely offset after were investors focused again on the Chinese governments’ efforts and that they will withhold the stimulus measures to ensure long term growth stability. Expectations for rising demand on oil with the economic stability and the start of the recovery remains the main factor and that sentiment continues to be foggy with the conflicting incoming data. The weekly EIA inventory status report showed that crude oil inventories rose by 1.3 million barrels, which added fear that the demand remains weak and strengthening the notion that the surge in was more speculative that on pure fundamentals. The rise recorded exceeded that seen the week before by 0.4 million barrels, which continues to argue week in and week out that the demand rout on oil has surely not ended. Meanwhile, the American Petroleum Institute also said that inventories rose by 3.85 million barrels, which also exceeded expectations for a rise of 1.8 million barrels. We can not for sure ignore the signs of stability that are emerging across the global economy, and even the U.S economy, yet we can not say that recovery is assured or that the recession has ended. The dilemma continues to be seen and the rally across the board is still not that logical whether it was equities, metals or commodities, for the recession remains and the demand rout is evident. That is why our fundamental assessment for crude oil lingers still at $65-75 a barrel as above that is too excessive and speculative investments are not paid attention to now, yet once an inflationary bubble explodes over the medium terms and the fragile economy then has to face a new shock, a lot will be biting their fingers! Nevertheless, that remains our fundamental and factual perspective as technically charts and indicators beg to differ as we can see on the chart below… The provided daily chart shows that the sequence that started at the recorded low over medium term basis has been capable of constructing an obvious impulsive wave, which consisted of 5 waves. With a deeper look at the rally that started at 47.90, we will find out that it has built an ideal impulsive wave. Actually, the crude is approaching a very critical level around 82.50, which represents the upper line for the ascending channel that controls the internal third wave of the fifth. Additionally, it represents the technical target of the aforesaid internal third wave of the bigger third. Thus, oil is to move gradually upwards to reach the above mentioned technical target around 82.50 zones, followed by a corrective rally towards 72.00 zones, where the preparation for the upside rally continuation will start. Assessing indicators, a negative divergence is currently under way as seen on the RIS 14 indicator, confirming that, its loosing its upside momentum gradually and proving the solid resistance of the detected areas. Note that a breakout below 0.7960 areas will confirm the start of the corrective action of the suggested internal 4th wave.

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