The weak daily RSI and the bearish turnaround of the daily oscillator should cap the rallies in the coming days. Against this backdrop, a lasting break of the $43.35 and $45 key barriers sounds tricky, and we rather fear a decline to supports $37 and $34.
Since the daily indicators are overbought, we cannot rule out a pullback to support at $37 and even to supports at $34.40 and $33.80 levels. These dips would enable us to gather momentum ahead of a new round of rallies. The pickup of the weekly indicators indeed pleads for another last test to the resistance at $45 (gap-filling activity).
A break of this level would be needed to initiate a more robust recovery to $50.00. Note that a drop below $37 would seriously undermine our favorite bullish view on Brent.
The supports stand at $37, $34.40-$33.80 and $30.00.
After a straight six-week upside run, the rally finally ended last week, and the weakness extended on Monday as well. Oil traders focus on COVID cases in Beijing and the US. And also, IEA’s Monthly Oil report (Tue) followed by OPEC’s monthly report (Wed).
Expectations of economic activity coming back to normal quicker than it was assumed a few weeks ago. Some G10 economies appear to be rebounding faster than in other countries. In early June, OPEC+ agreed to continue cutting oil production by 9.7 million barrels a day through July 2020. It is the deepest cut ever agreed to by the World’s oil producers.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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