Crude oil continues to find support, driven by a combination of positive supply and demand factors, propelling prices back into the $80 range. The ongoing tensions in the Red Sea contribute to the supply-side concerns, heightening geopolitical risks in the Middle East, particularly with the Israel-Hamas conflict showing no signs of resolution.
On the demand side, recent economic data indicates a robust reacceleration in activity. This is further supported by expectations of rate cuts and the conclusion of the tightening cycle. Additionally, the People's Bank of China (PBoC) has already reduced its Reserve Requirement Ratio by 50 basis points, signaling a move towards easing measures, considering the fragility of the Chinese stock market. The overall outlook suggests the possibility of even higher crude oil prices in the near future.
Examining the daily chart, it's evident that Crude Oil experienced a rebound precisely at the trendline, attracting buyers who entered the market with a clear risk level below this trendline. This led to a robust rally, pushing prices to new highs, with the market currently targeting the $80 resistance zone. Anticipated at this level are sellers poised to enter the market, setting a defined risk level above the resistance in anticipation of a potential pullback towards the trendline.
Conversely, bullish traders will be closely monitoring for a breakout above the $80 resistance, as this could fuel further optimism and encourage additional buying interest, especially with an eye on the crucial $83 level. This dynamic sets the stage for a pivotal moment where sellers and buyers are strategically positioning themselves based on the market's response to these key resistance levels.
Analyzing the 4-hour chart, a secondary trendline becomes apparent, playing a crucial role in delineating the current upward momentum. Should there be a pullback to this trendline, buyers are likely to find support, especially considering the confluence with key Fibonacci retracement levels and the prominent red 21 moving average. This convergence of technical indicators enhances the significance of the trendline as a potential buying zone.
Conversely, sellers are inclined to observe a scenario where the price breaks below this minor trendline, thereby disrupting the bullish setup. Such a development would prompt sellers to position themselves for a potential descent towards the major trendline, signaling a shift in market dynamics. The interplay of these factors underscores the importance of closely monitoring the trendline, Fibonacci levels, and moving averages for discerning potential price movements.
Chris
Head Trader & Coach
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