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Brent crude oil has staged a strong pullback towards the $67.00 level as traders and investors reacted to the news that a key pipeline in the United States resumed operations after shutting down due to a cyber-attack.
Market participants also remained cautious towards the oil demand story as coronavirus cases in India remained high. India is one of the world’s largest oil importers, hence markets are concerned about the oil consumption story coming from India.
This week oil has been under pressure since the US monthly CPI number increased the most on a monthly basis in over a decade. The ongoing labour glut, and commodity surge has raised fears that the FED could be forced to raise rates.
Conventional wisdom, and history has shown that raising rates normally boosts the US Dollar currency. As raising rates usually pressures oil price because it makes oil more expensive for holders of other currencies.
Still, the short-term bull trend remains in play while Brent trades above the $66.00 level, and the overall bullish trend in the long-term is unmatched while Brent oil trades above its 200-day moving average, around the $53.00 level.
So buying into price dip still remains the top play as rising commodity prices is still one of the biggest trends in financial markets right now. Rate hikes aside we should remember that improving global growth and supply constraints are still a big factor in oil prices.
Market sentiment towards Brent Crude is still extremely bullish, which hints at further losses for Brent oil. The ActivTrader Market Sentiment tool shows that some 91 percent of traders are bullish towards further gains in Brent oil. This worrying sentiment extreme has dipped by 3 percent by last week, but it is still extremely high and signalling that a major pullback is about to take place.
Brent Crude Oil Short-Term Technical Analysis
According to the four-hour time frame a bullish inverted head and shoulders pattern has formed after Brent crude reached the $70.00 level.
The overall size of the bullish reversal pattern is predicting a coming $10.00 price advance in Brent crude oil. Bulls need to maintain the price above the $70.00 level to activate the pattern.
Traders may buy any pullback towards the $66.00 level in expectation of a coming rally. Extended support is found at the $64.50 and $63.00 levels.
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Brent Crude Medium-Term Technical Analysis
Looking at the daily time chart, an extremely inverted large head and shoulders pattern with a $70.00 upside potential remains the central focus of medium and long-term traders.
A move above the $71.00 level would likely take Brent crude towards $80.00. The much bigger picture could see Brent reaching $160.00 in future if the pattern plays out to its full upside projection.
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