Crude Oil Price Finds Support But Market Fears Remain
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Oil Sell-Off Finds Temporary Reprieve
The price of crude nudges higher, finding support from a strong technical support level that may hold in the days ahead. However, if the global economic backdrop continues to worsen, support may soon turn into resistance. Wednesday’s sell-off saw risk markets rattled as fears of an economic slowdown rose. Equity markets saw triple-digit sell-offs while risk-off assets including the Japanese Yen and the Swiss Franc caught a decent bid.
The ongoing US-China trade spat continues to weigh on sentiment with fears that a further escalation between the two sides will crimp global activity. In addition, recent economic sentiment data from the Euro-Zone - particularly from Germany – is pointing to a Q3 and Q4 slowdown, just as the ECB is preparing to end its loose monetary policy.
From the supply side of the equation, recent comments from Saudi Arabia energy minister Khalid al-Falih that they would ‘meet any demand that materializes to ensure customers are satisfied’ led many to believe that the recent high print of $86.42/bbl. – made on October 3 - marked the market top.
The daily crude oil chart shows the 200-day moving average holding firm, something that also occurred mid-August this year before the market rallied sharply. The 200-dma – currently at $74.93/bbl. provides bulls with some support but a break and conclusive close below here would see the August 15 swing-low at $70.49/bbl. the short- to medium-term target. A gap on the October 23 sell-off candle back to the October 18 low at $78.42/bbl. is the bulls short-term target.
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Crude Oil Price Daily Chart (April – October 25, 2018)
The latest IG Retail Sentiment Indicator shows that traders are 78.1% net-long US crude oil – a bearish contrarian sign. However recent shifts in daily and weekly sentiment suggests a strong bearish trading bias.
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--- Written by Nick Cawley, Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.