International-benchmark Brent crude oil futures settled higher on Friday, rebounding from the previous session’s steep sell-off. Traders are saying the selling pressure was fueled by a reaction to weaker-than-expected U.S. manufacturing PMI data, which raised concerns over future demand.
Although the concerns may be legitimate, they may be a little premature. Furthermore, the market remains supported by the OPEC-led supply cuts which could be extended into the end of the year at a June meeting of the cartel and its allies.
Friday’s price action suggests the sell-off on Thursday may have been overdone, or it was fueled by a series of sell stops under the 200-day moving average at $68.59. If that’s the case then we could see a retracement back to this technical level.
On Friday, August Brent crude oil futures settled at $67.47, up $0.97 or +1.44%.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. Although the momentum has been trending lower since the April 25 closing price reversal top at $73.95, the trend didn’t turn to down until May 23 when sellers took out the previous main bottom at $68.02.
The downtrend will be reaffirmed on a trade through $65.73, followed by the next main bottom at $64.12. A trade through $72.41 will change the main trend to up. This is not likely however over the near-term.
The main range is $83.30 to $51.90. Its retracement zone at $67.60 to $71.31 is controlling the longer-term direction of the market.
The short-term range is $51.90 to $73.95. Its retracement zone at $62.93 to $60.32 is the primary downside target.
Daily Swing Chart Technical Forecast
Regular trading for oil on the New York Mercantile Exchange and metals on the Comex will be closed for the Memorial Day holiday.
When trading resumes on Tuesday, based on Friday’s close at $67.47, the direction of the August Brent crude oil futures contract over the short-term is likely to be determined by trader reaction to the main 50% level at $67.60.
A sustained move over $67.60 will indicate the presence of buyers. The first target is the 200-day Moving Average at $68.59. The short-term target zone is the retracement zone at $69.16 to $69.92. This zone is important to the structure. Since the trend is down, look for sellers to come in on a test of this zone. They are going to try to form a secondary lower top.
A sustained move under $67.60 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly led to a retest of $65.90.
This article was originally posted on FX Empire
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