Oil recent bounce from the support at $55 is an indication of Bullish intervention. The Bearish trend is still quite strong and may persist further. Let’s check Oil Technical Analysis for more levels and insights.
January 24, 2020 | AtoZMarkets.com – Oil sustained the Bearish trend after breaking below $58 area with a daily close recently. Despite the strong Bearish trend in place, Oil managed to bounce off the $55 support area. Coronavirus spreading in China is the main driver of the Bearish trend which until solved can lead the price much lower.
Oil declined 5% already throughout week as the respiratory virus weakened the demand of the fuel. As per reports, Coronavirus has infected over 800 people in China. The World Health Organization (WHO) has also declared the virus situation as emergency while warning people about it’s impact. Moreover, ANZ bank recently spread a warning about declining energy demand of Transportation sector which had immediate affect on the Oil price.
Additionally, recently U.S. Crude Oil inventory also declined despite having an all time high stockpiles. As Libya and Iraq unrest continues, the Bearish pressure in the Oil price may soon reverse and contribute to further gains in the process.
Oil Bounce from Support at $55 to push higher?
Oil has been non-volatile and impulsive with the recent Bearish momentum since it rejected off the $65.50 area. Despite Libya and Iraq unrest affecting the Oil supply, the China virus situation affected the Oil price growth severely.
Recently, the price bounced off the $55 area pushing the price higher in the process. According to 4 hour chart, the price formed Bullish Engulfing pattern from $55 support area and currently sustaining the bullish pressure in the process.
image: Oil 4 hour chart
While the price was moving lower after breaking below $58 to $55 support area, it managed to form Bullish Divergence. The support area at $55 has proved to be strong enough to push the price higher earlier and currently may also play its part very well. The dynamic level 20 EMA, Tenkan and Kijun line is currently residing above the price as resistance. Moreover, The Chikou Span (Green Line) is closing in to the price line which if manages to break above may lead to strong upward pressure.
As per current price action, the price may push higher towards $58 again before any Bearish intervention is observed. On the contrary, an intraday break above the Kumo Cloud resistance in Oil at $58.50 may inject more bullish pressure resulting in reversing the Bearish trend.
Oil may Reverse the Bearish Trend
the price has been quite impulsive with the recent Bearish momentum. According to Daily Chart, the recently showed strong Bearish Rejection off the $55 area. Additionally, the price also formed Bullish Divergence along the recent Bearish leg off the $58 area. As per current scenario, as the price remains above $55 area with a daily close, certain Bullish Intervention is expected in the coming days.
To Conclude, Oil bounce from $55 support area while forming Bullish Divergence in multi-timeframes indicates Bullish momentum in the making. Though it is still indecisive until a daily close above $55 confirms the sustainability.
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