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Brent crude oil is firming above the $50.00 level, as the prospect of continued QE from the US Federal Reserve is helping to underpin the overall bid-tone in the commodity sector. Even bearish news about an unexpected build up in oil inventory has failed to sink Brent below the $50.00 level this week.
If current price action is an indicator of future prices, then Brent crude does not look ready to turn lower yet, and may well be headed towards a new multi-week and multi-month trading high over the coming days.
In the near-term, other downside risks are also looming over Brent crude, such as the new mutant strain of COVID-19 and the prospect of President Trump not signing the proposed $900 billion US stimulus bill into law.
Goldman Sachs has recently given a big call for Brent Crude, with the investment bank noting that they expect Brent to trade at $65.00 next year. Other investment banks are also causing for Brent crude to trade higher than the current price level next year.
The timing of a such a move is unclear, as the prospect of lockdowns in UK, Europe, and the United States in the first quarter on 2021 look increasingly likely. Ongoing lockdowns are likely to be a continued drag on the demand side for Brent crude oil.
The supply side of the equation will be closely monitored by traders and investors, especially since the latest reports of an unexpected build up in oil inventories.
Technical analysis is currently pointing to more upside for Brent Oil, with the $57.00 level highlighted across various time frames as a possible upside target over the coming weeks and months.
Brent Oil Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that an inverted head and shoulders pattern has been activated, following the recent late-November breakout above the $46.90 resistance level.
According to the size of the bullish reversal pattern Brent Crude Oil could be preparing to rally towards the $57.00 resistance area. The pattern remains valid while the price continues to trade above the $36.60 level.
Source by ActivTrader.
Technical analysis also shows that bearish price divergence on the MACD indicator has formed, and extends down towards the $45.00 support area.
It remains to be seen whether Brent crude oil will turn lower from current levels to reverse the negative price divergence, or whether Brent crude will hit the $57.00 to 60.00 resistance area and then stage a reversal.
Brent Oil Medium-Term Technical Analysis
Technical analysis on the daily time frame shows that an important long-term trend line is in focus, and is currently located around the $57.00 area. It is certainly interesting that short and medium-term technical analysis is aligning here.
Looking more closely at the trendline in question on the daily time frame, Brent Crude fell by over $40.00 when it was first broken earlier this year, during the COVID-19 inspired market flash crash, meaning that a very important technical test of the key trendline may be about to happen.
Source by ActivTrader.
The daily time frame also shows that significant amounts of negative price divergence has formed on the Relative Strength Indicator, and extends down towards the $45.00 region.
According to technical analysis, the $60.00 and $62.00 level offers the strongest form of resistance on the daily time frame if the $57.00 level is broken.
