Oil is the focus of today’s chart of the day as we are currently sitting in a fairly interesting spot both macro-economically and within day-to-day trading.
Oil is an interesting asset because of the supply & demand drivers and also the risk on nature of the product (e.g. in risk-on days you will see Oil rally and vice versa on risk off days).
After President Trump’s tweet a couple of weeks ago stating that the oil price was too high, we saw the price trading sharply lower and down from the $58 handle. Since then we have formed a slowly squeezing channel, however, we are waiting for the supporting trendline to be confirmed.
As of this morning, we have now cleared the $58 resistance (orange dashed line) and managed to hold above that level. The move has lost some of its momentum as the RSI pushed into overbought territory but currently, we are still holding close to highs after the $58 was tested again and held as a form of support.
One thing to note is the decline in volatility in Oil, since the beginning of 2019, the Crude 3-monthly implied volatility index has declined aggressively from highs at 50 to down at around 28 currently which is why the moves in Oil have become a lot more muted than those of previous years, as Oil settles into a new normal around the $60 a barrel price as a pose to the lofty highs of $100+
As OPEC urges for further supply curbs, Oil will definitely be remaining in the watch-list, with a close eye also kept on Trump’s tweets in case he decides the price is too expensive.
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By Alex Simcock
This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions. Trading Forex and Derivatives carries a high level of risk.
Sources: Go Markets, Tradingview