October Crude Oil futures traded slightly lower on Thursday because of a stronger dollar, but bearish traders were unable to break the market because of concerns over an impending invasion of Syria by the U.S.
Friendly ADP private sector jobs data along with better than expected weekly jobless claims helped drive interest rates higher, making the U.S. Dollar a more attractive investment.
Crude oil prices fell since the market is dollar-denominated. Later in the session, a stronger than expected ISM Services PMI report sent the dollar even higher, but crude oil traders did not sell. This was further proof that investors were more concerned over a military intervention against Syria’s government rather than supply/demand issues at this time.
Although the market remained lower for the session, investors continue to push the market away from the low of the day shortly after the government announced a decline in crude oil supplies last week. According to the Energy Department’s Energy Information Administration, crude oil supplies dropped by 1.8 million barrels to 360.2 million barrels.
Although this number was above year-ago levels, speculators supported the market because of the possibility of military action against Syria late next week.
Technically, the market is bumping up against a major retracement zone at $108.23 to $109.27. This graphically represents a balanced market. A sustained move above this zone will mean speculators are gaining control of the market and that higher prices are likely.
The main trend is up on the weekly chart. The nearest support is an uptrending Gann angle at $104.30. A trade through the main bottom at $101.82 will turn the main trend to down and could trigger an acceleration into the major retracement zone at $100.10 to $.98.24.
Friday’s U.S. Non-Farm Payrolls report is expected to be strong enough to warrant a change in policy by the Fed later in the month. Although this should mean another up move in the dollar, crude oil prices are not likely to move too far away from the breakout zone since the focus of oil traders is likely to shift from Fed tapering to the possible start of the military action next week.