The dance moves around 200MA-monthly started last week; as a result, the six-week-long rally finally ended. Three factors have been keeping us sidelines instead of joining the party.
As shown on the below chart, twice the price failed at monthly 200MA, and it is worth being cautious as we are approaching 200MA again. On top of the Monthly 200MA resistance, the weekly RSI divergence is also the other bottleneck to the current rally.
A thick layer of support is located at $71-0.50 and $69.90. Below here, $64.50 exists. A move below $69.90 is required to confirm the short-term bearish signal on top of these factors, further stronger USD likely to apply brakes to the oil rally.
Looking ahead, disturbance in the OPEC group is the risk factor to the oil price as the current alliance closes the tap.
“Uncertainty has enveloped the market in the wake of OPEC’s stalemate over future production increases. The current production cuts remain in place in the absence of a deal, which should see the market tighten further amid strong demand. However, a lack of unity in the group presents a real risk over the medium term. A breakup of the alliance could see output surge”, Daniel Hynes at ANZ said in a note yesterday.
On a bullish scenario, as long as $70.00-$71.00 serves as support -it should approach bullish bias aiming at $75.30, $77, and $80 levels. The current bullish trend will truncate if the price closes below $69.90 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
What is your Technical View?
Do you have a different idea? Please leave us a comment and get an answer from our professional analysts