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James Hyerczyk
Brent Crude Oil

International-benchmark Brent crude oil futures are following U.S. futures higher on Wednesday after a private industry report released late yesterday showed a decline in U.S. crude inventories.

Additionally, the conflict between the United States and Iran continued to underpin prices while stoking fears of a potential supply disruption. Demand concerns were also somewhat dampened on Tuesday when Fed Chair Powell failed to acknowledge the need for an interest rate cut due to a weakening economy.

At 07:09 GMT, September Brent crude oil futures are trading $59.06, up $1.23 or +2.14%.

The American Petroleum Institute (API) reported stockpiles fell by 7.5 million barrels in the week-ended June 21. Traders were looking for a 2.5 million barrel decline.

Daily September Brent Crude Oil

Daily Technical Analysis

The main trend is up according to the daily swing chart. The uptrend resumed earlier today when buyers took out three days of highs. The market has room to run to get to the next main top at $71.61, however, it’s going to have to get through a series of retracement levels first.

The main trend will change to down on a trade through $59.39, followed by $58.47.

The 200-day Moving Average at $67.21 is also a potential upside target.

The intermediate range is $71.61 to $58.47. Its retracement zone is $65.04 to $66.59. This zone is currently being tested.

The main range is $73.35 to $58.47. Its retracement zone at $65.91 to $67.67 is the next upside target.

Combining the two retracement zones makes $65.91 to $66.59 the best upside target.

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Daily Technical Forecast

Based on the early price action, the direction of the August Brent crude oil market the rest of the session is likely to be determined by trader reaction to the 50% level at $65.04.

Bullish Scenario

A sustained move over $65.04 will indicate the presence of buyers. If this is able to generate enough upside momentum then look for the rally to extend into the next 50% level at $65.91. This is followed by a short-term Fibonacci level at $66.59.

Overtaking $66.59 will indicate the buying is getting stronger with the next potential target the 200-day Moving Average at $67.21, followed by the main Fibonacci at $67.67. This is the trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $65.04 will signal the return of sellers. If this move is able to generate enough downside momentum then look for the selling to possibly extend into $61.97 over the near-term. This is highly unlikely at this time unless today’s U.S. Energy Information Administration report is extremely bearish, peace breaks out in the Middle East or Trump and Xi cancel their meeting at the G-20 summit.

Overview

Given the easing of tensions between the US and Iran so far this week, and the upcoming meeting between Trump and Xi on Saturday, the price action today is likely to be controlled by the outcome of the EIA weekly inventories report at 14:30 GMT. It is expected to show a 2.7 million barrel draw down.

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