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Crude Oil Prices May Fall as US Retail Sales Data Shapes Fed Outlook

Crude Oil Prices May Fall as US Retail Sales Data Shapes Fed Outlook

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  • Crude oil prices fall as Colonial Pipeline restarts, Biden grants Jones Act waiver
  • US retail sales, consumer confidence data may stoke Fed policy pivot speculation
  • WTI contract inches closer to confirming a bearish Double Top reversal pattern

Crude oil prices fell as the Colonial Pipeline – the largest gasoline delivery conduit in the US – restarted operations after a hacking incident. Its operators reportedly paid close to US$5 million in ransom. The Biden administration also waived Jones Act restrictions on fuel deliveries by foreign tankers.

The White House move to ease supply shortages and Colonial’s return seemed to ease fears about a lasting shortage of fuel supply, driving prices lower. Broader weakness across the raw materials space added to selling pressure. Averages tracking industrial metals and agricultural commodities prices fell.

Looking ahead, the spotlight turns to April’s US retail sales data as well as the May edition of the University of Michigan gauge of US consumer confidence. Receipts are expected to rise by 1 percent, marking deceleration from the 9.8 percent rise seen in March. Sentiment is penciled in at a 14-month high.

US economic news-flow has improved relative to baseline forecasts recently, which may foreshadow upside surprises on the day’s statistical roundup. That may stoke reflation bets and inspire speculation about a sooner-than-expected reduction of Fed stimulus, boosting the US Dollar and pushing crude oil prices lower.

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Crude oil prices are inching closer to confirming the formation of a bearish Double Top pattern in the following a test of trend-defining resistance in the $66-68/bbl area (as expected). Prices broke the near-term sequence of higher highs and lows, deflating upward momentum.

From here, breaching immediate support at 63.53 would open the door for a move to test the minor barrier at 60.61, followed by the would-be Double Top’s neckline at 57.25. A daily close below this critical threshold would complete the bearish formation, implying a measured below the $47 figure thereafter.

Alternatively, securing a hold above the $68/bbl mark would probably neutralize selling pressure and set the stage for extension upward. The 38.2% Fibonacci expansionat 70.37 approximates initial resistance, followed by the 50% level at 74.42.

Crude oil price chart - daily

Crude oil price chart created using TradingView


--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.