18 July, AtoZForex.com, Vilnius – It has been the third consecutive week for oil to fall, adding up to a 90 pip or $9 drop to the 50.8 level as the Iranian deal goes through.
The current plunge could be explained at the hand of several factors: the uncertainty in China, crises in Greece and of course more oil supply expectations due to the Iranian deal. 30% drop in China’s stock market over the past month has brought commodity prices down with it. Accelerated Greece debt issues casted wider uncertainty over Eurozone, hurting worldwide trade. And finally, Iran had the final push with an unknown outcome of his nuclear program deal, as investors feared that Iran will flood the already oversupplied market with its massive oil reserves.
However, technically the plunge started when a weekly downward slopping trend line was reached. Now, crude has reached Fibonacci 61.8% retracement level, which is famous for reversing the trend. If so, from Fibonacci perspective, we could expect to see the price appreciate to $60, a Fibonacci 88.6% retracement level after reversing it.
To short Oil, after a confirmed break of 61.8% Fibonacci retracement zone at 49.9, we could see the price drop to as low as 88.6% retracement level 60 pips away at 44.3, with a stop loss just above the monthly downward trend line at approximately 50.1.
Alternatively, since it would seem that RSI can not break a 30 level into a downside, it should finally bounce from it, helping the bulls to push skyward to a first upward slopping trend line at around 53.8 zone. This could be taken as a long opportunity, after a confirmation of RSI braking a 38 level. The broken trend line would lead to a further rise to 56.5 and finally to the Fibonacci 88.6% retracement level after reversing it at $60.
Lastly, falling oil prices also show its negative side on CAD as Canada is an oil exporting economy, hence we could expect further highs on USDCAD for the coming week may the Oil prices keep falling.