By Russell Glaser – Spot crude oil sold off sharply yesterday and continues to fall into this morning’s trading following further European sovereign debt worries. This may present a buying opportunity as the price has dropped to an attractive technical level.
The price of spot crude oil fell to $81.25 this morning, from an opening price of $82.25. Spot crude oil prices have fallen almost 5% the past 3 days. Equity markets were hit particularly hard. The S&P 500 fell 2.34% yesterday as risk taking was absent in the markets.
However, not all commodities felt the squeeze of contagion as the price of spot gold rose on safe haven buying. Gold climbed higher to $1165 after traders looked for less risky assets.
The fallout began after Standard and Poor’s Rating Service slashed Greece’s sovereign debt rating to BB+ (junk status) from BBB+ and lowered Portugal’s debt rating two levels to A- from A+.
Spot crude oil is being pressured by the European sovereign debt crisis. Hence, the euro has weakened versus the dollar. The EUR/USD fell its lowest point this year. Spot crude oil prices typically have a reverse correlation with the dollar’s strength. As the dollar rises, spot crude oil prices fall.
Today the spot crude oil market will be anticipating the weekly U.S. crude oil inventories report. Market expectations are for a rise of 900K barrels. However, the report may be overshadowed by the events surrounding the Greek fiscal crisis.
Despite the slump in the price of spot crude oil, traders may find this an opportunity to enter into the market at an attractive price. The price of spot crude oil has fallen to the lower channel line on the daily chart at a price of $81.25. We could see a bounce in the price from this chart pattern towards the $84.50 price level. Should the price channel be broken, the next support line on the daily chart rests at $80.75.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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