International-benchmark Brent crude oil closed lower on Friday as traders grew more concerned about the economic damage of the new coronavirus that has spread from China to around 20 countries, killing more than 200 people, and virtually stopping all air travel to and from the country.
In the meantime, Saudi Arabia has opened a discussion about moving an upcoming policy meeting to early February from March to address the impact of coronavirus on crude demand.
On Friday, April Brent crude oil settled at $56.62, down $0.71 or -1.25%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through Friday’s low at $55.93 will signal a resumption of the downtrend. The next major target is the October 3, 2019 main bottom at $54.80. This is the last support before the December 24, 2018 main bottom at $52.78.
The main trend will change to up on a move through $64.49. This is highly unlikely, however, due to the steep sell-off, the best sign of a short-term bottom will be a closing price reversal chart pattern.
The minor trend is also down. It will change to up on a trade through $59.83. This will shift momentum to the upside.
The major range is $52.78 to $71.02. Its retracement zone at $61.90 to $59.75 is potential resistance. This zone is controlling the longer-term direction of the market. Trading below it is helping to generate the downside bias.
Daily Swing Chart Technical Forecast
Taking out $55.93 will signal a resumption of the downtrend. If this move creates enough downside momentum then look for the selling to possibly extend into the next main bottom at $54.80. If this bottom fails then look for the selling to possibly extend into the next main bottom at $52.78.
Holding $55.93 will indicate the presence of buyers. If this move can create enough upside momentum then look for a short-covering rally to possibly extend into $57.88, followed by the resistance cluster at $59.75 to $59.83.
With no sign of a let up over the week-end, and more cases of the coronavirus popping up all over the globe, we have no reason to anticipate a rapid turnaround to the upside. OPEC and its allies may decide to extend or increase their production cuts, but that shouldn’t make a difference because no one knows how much demand will drop due to the current crisis. A pre-emptive move by OPEC may not be enough to stem the price slide.
This article was originally posted on FX Empire
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