Brent crude oil closed at $61.85 levels on Monday, at a sniffing distance from its 200EM. Do you think it will touch the 200MAs?
Friday’s US labor market data and raising hopes for a preliminary US-China deal are the factors backing the oil prices. Whereas, sluggish growth of the global economy could be expected to cap the prices in the medium term.
“2019 oil demand forecasts cut as economies slowed” World bank cited.
In the October Commodity Market Outlook, the world bank said, “The global forecast for oil production in 2019 has been repeatedly revised downward over the last year and a half amid weakening demand for oil. Growth in demand is now around 1%, or 1 million barrels per day – the weakest growth rate since 2012, according to October 2019.”
The downward revision reflects the weaker outlook for global growth and, therefore, for oil demand. If economic growth deteriorates further, oil demand could be substantially weaker, says the report.
The report also says, “Oil prices are projected to average $60/bbl in 2019 and are forecast to weaken to $58/bbl in 2020, $7/bbl lower than the previous forecast.”
Turning to the technical picture, the overnight rally failed to close above the last two weeks high, whereas the support has been moved up from $57.90 to $59.00 levels. As per the new A-B-C pattern, a decisive breakout above $62.60 could allow the price to visit 200EA, located at $63.30. The daily RSI is showing some upward momentum, and the oscillator has been turned back to bullish.
The combination of these two technical factors shists the focus of the key resistance zone between $63.15-63.30 levels.
Flipside supports located at $60.45 and $59.00 levels.
We still believe the price has limited headroom available. 200MAs spread between $63.50-64.00$ levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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