August 8, 2022 [DailyForex] – The market is likely to see a lot of negative pressure due to so many different headwinds around the world.
This is not to say that we are going to see a massive collapse, but there are a lot of things working against the value of oil. This is even though OPEC has decided to cut production, the reality is that the market must worry about the economy slowing down, as the market has been trying to price in the fact that monetary policy tightening and the whiplash effect of the pandemic to the supply chain has caused mass chaos.
Looking for Signs of Exhaustion
The market is getting ready to see the so-called “death cross”, which is when the 50 Day EMA drops below the 200 Day EMA, kicking off a very negative longer-term signal. It quite often is a bit late, but longer-term traders may pay close attention to it. In this scenario, I suspect that we have plenty of sellers on short-term balances, especially since we see any sign of exhaustion.
Keep in mind that the US dollar strengthening could also be a bit of a problem for this market, but right now I think we are more likely than not to continue to see a “fade the rally” type of situation, thereby looking at the $95 level as a potential resistance barrier, especially now that both moving averages are sitting in that general vicinity.
As soon as we rally, I will be looking for signs of exhaustion. However, if we break down below the $85 level, that is just as good of a reason to start selling, and I will do so at the first opportunity. In that scenario, I would anticipate that crude oil falls to the $80 level rather quickly. It is not until we can break above both moving averages that I would consider buying this market, and Tuesday should be a crucial day because we will finally have full trading again and can read what the market thinks about the news over the weekend.
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