OIL PRICE FORECAST: CRUDE OIL CHARTS CRUMBLE 10% TO TEST TECHNICAL SUPPORT DRIVEN BY LULL IN MIDDLE EAST TENSION
- Oil prices have plunged over 10% from the swing high printed earlier this week as Middle East geopolitical risk fades amid a lack of military escalation between the US and Iran
- Crude oil charts now search for technical support or the next fundamental catalyst with potential of sparking supply shock fears to keep the commodity afloat
- Read up on these Crude Oil Facts to improve your crude oil trading knowledge
The price of crude oil has come under considerable pressure since jumping above the $65.00 mark – its strongest reading since April 2019 – as geopolitical risk in the Middle East seemingly fades. In fact, crude oil prices swooned over 10% from the intraday swing high recorded on January 08 notched in the wake of reports that Iran attacked US military bases in Iraq.
OIL PRICE CHART: WEEKLY TIME FRAME (NOVEMBER 2017 TO JANUARY 2020)
Chart created by @RichDvorakFX with TradingView
The more recent nosedive in crude oil prices can be attributed primarily to the lack of appetite for intensifying the situation further judging by a recent speech from President Trump who restrained from responding with military action in lieu of imposing economic sanctions.
Oil prices quickly pivoted lower after a hard rejection around the $65.00 price level, which has historically posed as a major zone of confluence and technical resistance recently as April 2019.Spot crude is currently trading around the $59.00 level and on pace to close the week roughly 6.25% lower, but the commodity could soon find technical support with keeping oil prices bolstered.
OIL PRICE CHART: DAILY TIME FRAME (AUGUST 2019 TO JANUARY 2020)
Chart created by @RichDvorakFX with TradingView
Shifting focus from a weekly to a daily crude oil chart brings to focus the 50-day simple moving average, which may help alleviate downward pressure recently exerted on oil prices. Also, crude oil is currently hovering near technical support provided by the bottom barrier of its 2-standard deviation Bollinger Band and has potential to send the price of oil snapping back higher.
On the contrary, technical resistance appears to reside around the $60.00 handle and is highlighted by the 38.2% Fibonacci retracement of the most recent bullish leg etched out by the price of crude oil.
Read More: CAD & Oil – The Canadian Dollar & Oil Price Correlation
As one might expect, however, crude oil prices could spike on a whim once more if Middle East tension escalates again. Also, oil traders should keep close tabs on US-China trade deal headlines and market sentiment considering the global GDP growth narrative and risk appetite tend to broadly steer the commodity’s direction.
-- Written by Rich Dvorak, Junior Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
