Crude Oil Looking Weak

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

On Monday morning, November 2nd, Brent remains weak as it is trading not far from $37.45. Market players are in no hurry to risk: the presidential elections in the USA are ahead and investors usually try to escape all possible risks while expecting the results.

In addition to that, expectations of the demand for energies remains rather moderate. Hopes for China didn’t work out – the country’s economy is recovering but not too fast. As for the USA, it obviously needs some additional impulse, for example, a stimulus package, but it won’t happen until a new President is elected. In this light, the price growth potential is extremely limited.

Moreover, the oil market is currently very sensitive to the coronavirus situation in Europe. Starting today, Germany is introducing a “soft” lockdown mode – restrictions are intended to reduce the COVID-19 spread rate. France is the next.

Lockdowns, no matter light or hard, are a very questionable measure for Europe. On one hand, they do provide medical workers and facilities with time and save the population from the fast cross-contamination. On the other hand, they are a disaster for economies and have a negative influence on the demand for energies.

In the H4 chart, there was a gap this morning, which helped Brent break 37.72 to the downside. In the future, the price is expected to continue falling towards 35.10. This entire decline may be considered as an extension of the correctional wave. After reaching the above-mentioned level, the asset may start consolidating. If later the market breaks the range to the upside, the instrument may resume growing with the first target at 40.04. From the technical point of view, this scenario is confirmed by MACD Oscillator: its signal line is moving below close to the lows inside the histogram area. A breakout of the area to the upside implies a new growth towards 0. A breakout of this level, in its turn, will boost the price chart growth.

As we can see in the H1 chart, after completing the descending wave at 37.72 and forming the consolidation range around this level, Brent has broken this range to the downside; right now, it is expected to extend the correctional structure down to 35.46. Later, the market may start another growth to test 37.10 from below and then resume moving within the downtrend to with the target at 35.10. From the technical point of view, this idea is confirmed by Stochastic Oscillator: its signal line is moving below 50 within the “oversold area”. It has already reached 20 and may break the area to the upside towards 50, which suggests a new correction on the price chart.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.