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Strong Crude May Lead to Risky Environment

By:
Dmitriy Gurkovskiy
Published: Apr 23, 2018, 11:44 UTC

The crude is trading around its 4-yeah highs early this week. Brent is above $74, which means the long-term ascending channel is still here to stay and allows the bulls to make new records. Fundamentally, however, bears have more chance, while this is not very much significant in the lights of speculative expectations.

crude oil 9

In the meantime, Baker Hughes reported the rig count had increased by 5 and amounted to 1,013 in the US last week. The situation was quite the same the previous week, which is a good driver for the sellers. Still, the investors have not yet turned to these data.

The OPEC+ committee met Friday, but there was very little information on renewing the agreement regarding low production or ‘freezing’. All major comments were related to the current situation, which is going just as planned. Still, the OPEC not giving any clear signals on its further policy making is also good for the bears, while bullish investors are still hoping to get some hints during another OPEC meeting on June 22, which will be held in Vienna, Austria. If the OPEC fails to provide hints once again, however, the market will find itself in very tight circumstances.

Another thing worth noticing is that the currency stops influencing the crude oil price growth, with the USD index increasing over the last 5 days and likely to continue climbing up.

Besides, the price itself shows the investors are minimizing and hedging their risks as long as the crude goes up, which can be traced by the difference between the current contract and the futures contract with an 18-month expiry.

Technically, Brent is still uptrending both long and mid-term. The market has been inside an ascending channel for long, with the latest short-term impulse allowing for both tests and break out the resistance, which becomes support once the price stays above. The major target, for now, may be at the projection channel resistance at $78.50. Looking at the short-term ascending trend, one may note that the momentum is fading out, with lower highs formed. However, if the price bounces off the support currently being tested, it may continue rising up to $76.00. At the same time, support breakout near $73.30 is also possible, and in this case, the price may get back to the previous channel range, with the first descending trend target being at $69.50.

Brent 4H Chart
Brent 4H Chart

This article was written by Dmitriy Gurkovskiy, a Chief Analyst at RoboForex

About the Author

Dmitriy has Masters Degree in Finance from London School of Economics and Political Science, and a Masters Degree in Social Psychology from National Technical University of Ukraine. After receiving postgraduate degree he began working as the Head of Laboratory of Technical and Fundamental Analysis of Financial Markets at the International Institute of Applied Systems Analysis. The experience and skills he gained helped him to realize his potential as an analyst-trader and a portfolio manager in an investment company.

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