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Crude Oil Price Forecast: Delta Variant Concerns Spark Sharp Reversal – The Macro Setup

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Crude Oil Price Outlook:

Crude Oil Price Forecast: Delta Variant Concerns Spark Sharp Reversal – The Macro Setup

Crude oil suffered a sharp reversal to start the week as worries about the delta variant of the coronavirus sparked demand concerns. A resurgent US Dollar on the back of safe haven demand was likely another contributing factor to recent crude oil weakness and the fundamental forces have seen price crater beneath a key technical level. Derived from the pandemic lows in March, the trendline in question had helped guide crude oil higher for months and its recent failure could open the door to deeper losses for the commodity in the days ahead.

Crude Oil Price Chart: Daily Time Frame (July 2018 – July 2021)

Crude Oil Price Forecast: Delta Variant Concerns Spark Sharp Reversal - The Macro Setup

While the pace of declines has slowed, damage to the technical landscape has been dealt and the clear break beneath the March 2020 trendline constitutes a significant development for technicians. With arguably the most important trendline on the chart broken, subsequent support becomes less formidable and, should crude reverse higher, prior support will likely serve as resistance. Thus, the shift in the fundamental landscape has been followed by a similar downgrade in the technical landscape and further losses in the days ahead appear a real possibility.

Crude Oil Price Chart: 1 – Hour Time Frame (May 2021 – July 2021)

Crude Oil Price Forecast: Delta Variant Concerns Spark Sharp Reversal - The Macro Setup

With that in mind, secondary support becomes all the more crucial and areas that might offer assistance to bulls seem few and far between until the $62 to $60 area where the commodity’s May swing low resides alongside the 200-day simple and exponential moving averages. At the underside of the range is the psychologically-significant $60 mark that might serve as the next “line in the sand” standing in the way of another significant leg lower.

In this week’s episode of The Macro Setup myself, Guy Adami and Dan Nathan discuss the case for a continuation lower in crude oil and the various levels to watch among other price action unfolding in the market. Click on the video attached to the top of this article to watch the full episode. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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