Published On: Wed, Mar 1st, 2017

Brent Crude Oil: long downward correction


Current trend

Crude oil price still consolidates within a narrow side channel, as the US dollar tendency is still unclear, and also because there is contrast of growing oil reserves in USA and reducing oil reserves in OPEC and major oil exporters. Technically, the price the pair reached the upper border of the upward channel, but it can’t break the resistance, lacking catalyzing factors. Consolidation channel is narrowing, and a breakout is highly possible; all we have to do now is determining its direction. Let’s consider all pros and contra and decide on the chances of these situations actually happening. At the moment, demand for US dollar is supported only by FRS statements of USA economy having strong perspectives and willingness to hike the rate soon, but economic indicators state the opposite. This means that USA macroeconomic data can influence the dollar price and, accordingly, crude oil prices. This week, attention should be paid to job market data, Markit Services PMI and of course Weekly Crude Oil Stock data.

According to US Department of Energy, oil reserves continue to grow, which surely will influence the price. On the other hand, OPEC and major oil exporters dispel all doubts following the agreement to put freeze on crude oil stocks, and they even cut them. OPEC state that the agreement is very effective for stabilizing the global crude oil market. This agreement keeps the oil price at current high level. But we shouldn’t expect fast growth: any violation of the agreement or US key interest rate growing, and we’ll see the oil quotes falling. This means that price is unlikely to decrease.

Support and resistance

Disregarding the upward trend, long downward correction is highly probable. In short term, short positions could be opened with targets depending on the dynamics: 45.40 if the market is highly volatile, and 47.70 if the market is tranquil. Technically, indicators don’t give a clear signal due to low liquidity.

Support levels: 54.70, 53.75, 53.10, 51.95, 49.50, 57.70, 45.40.

Resistance levels: 56.75, 58.50, 60.00, 61.95.

Trading tips

In this situation, short positions could be opened at current level, with short Stop Loss order at 59.20 (above the upper border of the range) — and with targets at 45.40, 47.70.

Forex Analysis

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