Oil pulling away after testing key demand area

Oil pulling away after testing key demand area

Hi traders, welcome to today’s update. We can see demand and support developing for oil on the weekly and daily charts. In today’s update, we will concentrate on the weekly chart.

Overall price remains in an uptrend; this trend is long-term as it has been running since April 2020. Since the last spike to 130, we have seen price become choppy, with resistance at $119 – $124 and a new LH confirmed last month. A fast decline occurred after the LH and price briefly broke below the $100 round number.

It’s what’s happening below $100 that has our attention at the moment. We can see a strong area of demand from 97.50. Since February this year, each attempt from sellers has failed to break this area.

This week so far has been no different. Once again, we have seen a move into this area rejected by buyers in that area. With this in mind, we will see a new rally set up that could end up retesting the resistance area at 122? This all rests on the premise that the demand area can continue to hold.

If we did see a break, we would be looking for a new move lower that tests the main trend line. Some of the factors at the moment. Global recession fears, this could continue to drive the USD higher and put pressure on oil due to future demand. Further lockdowns in China could also weigh on demand due to China’s oil demand. Obviously, any new developments regarding Russia could also have a direct impact on supply.

Demand increasing or holding firm with price holding above the demand area could be a positive for buyers, but if factors swing against and we see a break of demand, the reaction could be turning into something more significant.

Finally, it’s pretty hard to believe right now that oil traded at $7.27 just over 2-years ago!

OIL W1 Chart

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Joseph Jeffriess, Market Analyst in Eightcap
Eightcap is one of the leading CFD brokers in the market, providing online trading services to a wide range of clients from around the world. They offer 1,000+ CFDs based on Forex, commodities, indices, shares, and cryptocurrencies. The well-established trading company was founded in Melbourne, Australia, in 2009, and is regulated by the Australian Securities and Investments Commission (ASIC), the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and the Securities Commission of The Bahamas (SCB).