• Investors becoming wary about the economic outlook
• Supply cuts remain supportive
• Head and shoulders neckline provides support

Oil prices recovered a little toward the back end of the week after coming under some pressure this month.

Supply cuts from OPEC+ continue to support the market but uncertainty over the global economic outlook – sluggish recovery in China, possible recession in the US and Europe – are weighing a little. 

Recent economic data has not been encouraging and central banks are maintaining their hawkish positioning which could compound that pressure further going into the end of the year. But with supply cuts continuing to be extended, particularly the voluntary monthly reductions from Saudi Arabia and Russia, the market is being supported, perhaps in a new higher trading range above $80 in Brent.

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A major area of support

Brent crude ran into support over the last couple of days in a very interesting area, around $82.50, a break of which could have sent a very bearish signal.

This area coincides with support from earlier this month as well as the 200/233-day simple moving average band which it only broke back above a month ago for the first time since August last year. A rebound off here could be viewed as confirmation of the initial breakout.

A move below would not only have sent a bearish signal, it would also have triggered the break of the neckline of a suspected head and shoulder pattern which could have been quite significant. 

BCOUSD Daily

Source – OANDA on Trading View

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