Crude Oil faces profit-taking after Israel’s response remains muted

• Crude Oil dives over 2% lower on Tuesday while China reopens after Golden Week. 
• Markets are starting to question Israel’s next move as time goes by. 
• The US Dollar Index eases for a second day in a row as the short squeeze in the DXY looks to end. 

Crude Oil abruptly halts its recent rally on Tuesday, with China reopening and returning to markets after the Golden Week festivity. A nosedive move in the Chinese Hang Seng equity index, by nearly 10% at its closing bell, sparked global concerns about China and its economic recovery. This also has implications for Crude Oil, with demand from the Asian Giant probably coming in lower again than previously anticipated. 

The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, eases for a second day in a row on Tuesday. The DXY saw a steep short squeeze last week, with US Dollar bears being washed out of their position in the process. Slowly but surely, the US Dollar (USD) bulls are starting to take profit in the rally, with the DXY in a slow grind lower in search of first support.  

At the time of writing, Crude Oil (WTI) trades at $75.18 and Brent Crude at $79.22

Oil news and market movers: Plenty of concerns

• Libya’s Oil production has climbed above 1 million barrels per day for the first time in two months after the resolution of a political standoff in the country, Bloomberg reports. 
• Chevron shut in Oil production at the Blind Faith platform in the US Gulf of Mexico ahead of Hurricane Milton, Reuters reports. 
• Chevron Corp and Canadian Natural Resources Ltd. signed a $6.5 billion deal for Chevron to sell the undeveloped oil sands in the Alberta province in Canada, Rigzone reports. 
• Hurricane Milton is making its way through the Gulf Coast toward the US peninsula of Florida and is set to hit by Wednesday morning, according to recent data from the US National Hurricane Center. 

Oil Technical Analysis: There goes $75.00

Crude Oil price was bound to see some selling after its steep rally higher due to the mixture of geopolitical tensions. With time passing and Israel not really delivering a military response, tensions are starting to ease a touch. Add in Libya news and China concerns, and the correction gets more weight. Expect to see possibly a further correction until strong support is found. 

Monday’s false break is to be ignored as the move has been fully paired back on Tuesday. It thus means that current pivotal levels on the upside are still valid: the red descending trendline in the chart below, and the 100-day Simple Moving Average (SMA) at $75.72 just hovering above it, makes that region very difficult to surpass. Once holding above there, the 200-day SMA at $77.15 should refute any further upticks as it did in early trading on Tuesday. 

On the downside, old resistances have turned into supports. First is the 55-day SMA at $72.71, which acts as a potential first line of defense in case of any retreat. A bit further down, $71.46 comes into play as second support before looking back to the $70.00 big figure and $67.11 as ultimate support for traders to buy the dip. 

US WTI Crude Oil: Daily Chart