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Andreas Zanin
Analysis | September 9, 2020

KTM Commodity Weekly: Unwinds a string of bearish divergence

The Brent crude oil fell more than 10% from Sep high to $42 levels. During this fall, the price lost a couple of key moving averages of 20, 50, and 100ea. Now focus on the 100MA, which is located at $39.50.

On Monday, Brent crude lost more than a percent after Saudi Arabia cuts crude prices for October on mounting oil demand outlook. Now the oil price is bearish on technical and fundamental aspects.

Brent crude oil price traced out a near-term price top near $46 via a double top pattern. The downturn is set to reassert itself as the series of daily RSI study unwinds a string of bearish divergence that formed between June and August. The demand dynamics shift indicates the price already capped around 200MA with support against the July 30 low at $41.90. Below here, the focus will move down to its 100MA at $40, followed by a critical support level at $37. Any rallies to $44 and $45 should attract selling pressure.

Demand concern is the critical driver to the current retracement, on top of this reduction in Saudi’s official selling price is adding fire to the flame.

Keisuke Sadamori, IEA director for energy markets and security, told Reuters the outlook for oil was in the midst of either a second wave or a steady first wave of the coronavirus.

According to Reuters, “The global economy is likely not headed for any major slowdown due to COVID-19 but piled-up storage and uncertainty over China’s oil demand cloud oil markets’ recovery, an official with International Energy Agency (IEA) said.”

 It is important to always keep in mind the risks involved in trading with leveraged instruments.

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