CRUDE OIL PRICES PLUNGE TO CRITICAL SUPPORT ZONE AS MARKET VOLATILITY SURGES DUE TO RETURNING COVID-19 LOCKDOWNS
- Crude oil value motion collapses over 5% amid a pointy uptick in volatility and threat aversion
- Oil costs may fall additional if a close-by technical help degree fails to curb aggressive promoting
- The commodity may succumb to bearish undercurrents as COVID-19 lockdowns stunt demand
The value of crude oil slid sharply decrease on Wednesday alongside different threat belongings like main inventory indices. Markets appear to be a sea of pink as dealer sentiment deteriorates broadly whereas coronavirus lockdowns mount throughout Europe. This has led to a surging measures of volatility and immense promoting strain throughout crude oil costs, which largely appears to comply with worsening prospects for financial development and corresponding slide in inflation expectations.
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CRUDE OIL PRICE CHART WITH VIX INDEX OVERLAID: DAILY TIME FRAME (24 JUN TO 28 OCT 2020)
Chart by @RichDvorakFX created utilizing TradingView
Particularly, crude oil costs have snapped again towards month-to-date lows because the S&P 500-derived VIX Index, or fear-gauge, explodes to its highest degree since June. The VIX Index and crude oil value motion usually preserve a robust inverse relationship as illustrated within the chart above. To that finish, crude oil may face additional promoting strain if the VIX Index extends its advance as threat aversion takes maintain.
| Change in | Longs | Shorts | OI |
| Each day | 27% | -16% | 10% |
| Weekly | 41% | -23% | 13% |
CRUDE OIL PRICE CHART: DAILY TIME FRAME (06 MAY TO 28 OCT 2020)
Chart by @RichDvorakFX created utilizing TradingView
The steep drop notched by crude oil has steered the commodity again to a important technical help zone across the $36.75-price degree. This potential space of buoyancy is underpinned by a confluence of month-to-date and September lows, the 200-day easy transferring common, in addition to a positively sloped trendline connecting the string of upper lows notched on 15 June, 08 September and 02 October.
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Failure to take care of this key help degree may encourage crude oil bears to make a subsequent push towards the $34.25-price mark earlier than the $31.00-handle comes into focus as the subsequent potential goal. Conversely, a reduction bounce is likely to be in retailer if crude oil bulls can defend and springboard off the aforementioned help degree again towards the 20 October swing excessive, however rebound makes an attempt might be undermined by the 50-day SMA.
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— Written by Wealthy Dvorak, Analyst for DailyFX.com
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