Brent – Break Higher on Dollar Weakness

After just over a month of consolidation, Brent crude has finally broken above the descending channel.

It had found strong support from a combination of the 55 and 89-day simple moving averages and an ascending trend line, while $60.60 had been heavily supported repeatedly over the last couple of months.

Brent daily

It has been suggested that 6 May highs of 69.22 may mark a temporary high for Brent but I have never been convinced and this breakout has only reaffirmed by view that there could be one final leg higher before it finds its range.

The way is responds between $67.30 and $69.22 will be key now for me. A break above here would confirm my suspicions, which is all they are at this stage, at which point we could see a move towards $71.20-$72.70 range. At this point, the 233-DMA could provide further resistance.

Alternatively, a failure to break above 6 May highs could be seen as confirmation of the new trading range – or fair value – for Brent between $60.60 and $69.22. Either way, the reaction to $69.22 should we get there will be very interesting.

*Shortly after completing this, EIA crude oil inventories showed the largest decline in crude stocks since July last year. A draw of 6.812 million was well above expectations of 1.72 million and Brent is now rallying.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.