By Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Brent is falling again but is still trading below the significant support area at 60.00. The long-term sideways channel between 60.00 and 67.00 remains in place. The instrument is seriously influenced by another round of trade wars between the USA and China as the US President Donald Trump announced additional 10% tariffs on some of the Chinese goods imported to the USA. As a result, largest oil consumers may reduce their demand for the “black gold”.
Moreover, last Friday the U.S. Energy Information Administration published Baker Hughes United States Oil Rig Count report, which has been falling for the fifth week in a row. Between July 27th and August 2nd, the number of active oil rigs went from 776 to 770 units. As a result, the actual number of rigs is the lowest since January 2018.
The pressure on oil remains. However, to continue pushing the instrument downwards, bears must fix the price below 60.00. In this case, the next downside target will be the area at 57.40.
In the H4 chart, Brent is forming the fifth descending wave. Possibly, today the pair may be corrected towards 63.50 and then form a new descending structure to reach 62.40. Later, the market may start another growth with the target at 64.89. However, all these ascending movements may be considered as an alternative scenario, which may be possible only after the price breaks 62.41. Until that, the instrument is expected to continue trading downwards with the target at 58.40. From the technical point of view, this scenario is confirmed by MACD Oscillator, as its signal line is moving below 0, thus indicating further decline towards 60.82. After breaking this level, the pair may continue falling to reach 58.40. Still, this scenario may no longer be valid if the signal line breaks 0 to the upside. In this case, the instrument may turn to the above-mentioned alternative scenario.
Get our Weekly Commitment of Traders Report: - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
As we can see in the H1 chart, after reaching the closest correctional target at 63.14, Brent has moved downwards and formed a structure towards 61.05; right now, it is consolidating near the lows. Possibly, the pair may form one more ascending structure to break 63.10 and then continue the correction to reach the short-term target at 63.50. Later, the market may fall towards 61.50 and then complete the correction by reaching 64.89. After that, the instrument may continue trading inside the downtrend with the key target at 58.40. From the technical point of view, this scenario is confirmed by Stochastic Oscillator, as its signal is moving upwards to leave the “oversold area”, thus indicating a breakout of 50 to the upside. After this level is broken, the ascending wave may continue up to 63.50. Still, this scenario may be canceled if the line rebounds from 50 to continue the actual trend.
Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.