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.
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.