Crude futures have darted beyond $70/bbl and our 1st and 2nd tier downtrend lines due to today’s rapid, broad-based depreciation of the Dollar. The Dollar’s weakness makes crude a more attractive import internationally since it is a Dollar-denominated commodity. Hence, bulls have received the development they’ve been looking for to send crude back to comfortable levels. The rise in buy-side activity only supports the strength of today’s movement to the topside. However, the S&P’s failure to participate thus far is bearing down on crude a bit, and could keep crude locked beneath our 3rd tier downtrend line for the time being.

Meanwhile, investors are eagerly awaiting Wednesday’s OPEC meeting followed by China’s wave of economic data on Thursday. Though investors are expecting OPEC to keep production unchanged, investors will be looking for guidance regarding the OPEC’s outlook for future consumption. In addition to the OPEC meeting, China’s economic data should have a noticeable impact on crude should Industrial Production come in above or below analyst expectations. China’s thirst for crude during the global economic downturn has attributed to crude’s impressive rebound from previous lows. Therefore, investors will be paying particularly close attention to the news wire on Thursday.

Correlation-wise, technical breakouts in both the EUR/USD and GBP/USD bode well for crude’s near-term outlook. All crude needs is for the S&P futures to follow suit before really causing some damage to the topside. Meanwhile, crude is experiencing multiple inflection points of its own. We expect volatility to pick up as the week progresses due to the wealth of data approaching. Technically speaking, crude has some more breathing room to the downside now with our 1st and 2nd tier downtrend and 1st tier uptrend lines serving as cushions along with the psychological $70/bbl level. As for the topside, crude futures must face our 3rd tier downtrend line and the lid of the August trading range, no easy feat. Regardless, crude is gaining momentum to the topside and yet needs a follow-through on large volume for confirmation.

Price: $71.50/bbl

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