Crude Oil Price Forecast: Breakdown Extends Toward Key Support Zone

Self-off Deepens After Key Support Breaks

Crude oil extended declines to a low of $76.13 on Tuesday, as it fell to potential support near the higher swing low of $76.83 from March. That was the first support zone that resulted in a higher swing low following the March peak of $119.54. Tuesday’s low showed a 36.2% decline from that peak, and it exceeded the 61.8% Fibonacci retracement at $79.65.

 Trend Structure Deteriorates as Moving Averages Fail

The decline in crude oil accelerated after failing to hold support near the 100-day moving average on Friday. Subsequently, an uptrend line broke, along with a higher swing low of $81.94 from mid-April. This puts crude oil on track to test support near the lower boundary of the 200-day moving average at $74.24, at a minimum. That is where there could be a strong bounce back into potential resistance areas.

Major Long-Term Confluence Zone Comes Into Focus

That area has additional potential significance due to its alignment near the potentially more significant 200-week moving average at $75.44. Since the start of 2023, the 200-week moving average was clearly recognized by the market as an area of both support and resistance. That gives the indicator a little added credibility, especially when aligned with same daily indicator – 200-day moving average.

Retracement Structure Defines Deeper Downside Risk

Since a key bullish breakout occurred above the $70.49 area at the beginning of March, that level remains a potential target if the 200-day line is exceeded to the downside. Since the 78.5% Fibonacci retracement of the prior advance is nearby at $68.81, there is a range of potential support from approximately $70.49 to $68.81. That would also be the maximum potential retracement that is currently anticipated.

Rebound Path Depends on Broken Triangle Retest

Rallies from support could rise up to the bottom of the symmetrical triangle consolidation pattern that triggered a downside break last week. Potential resistance noted by the 100-day moving average is at $88.37, along with the bottom of the triangle around $88.90. Since long-term support marked by the 100-day moving average was broken, and given its long-term nature, it would be one of the first more significant indicators to reclaim before further upside may be likely.