(MENAFN- Daily Forex)
The West Texas Intermediate crude oil initially rallied during trading on Monday, but then gave up a lot of ground almost immediately. The $83.50 level continues to be a bit of a barrier, so this way I think it's going to be difficult to imagine a scenario where we have enough momentum to take out that area in the short term. After all, OPEC has refused to cut output even further, so at this point, it looks like we go back to looking at the demand destruction that is almost certainly out there.
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The $75 level underneath could be a massive support level and breaking down below that would be very negative to say the least. It's also worth noting that we failed at the 50-Day ema , which is sitting right below the $85 level. The $85 level course has a certain amount of psychology attached to it, but then again so does the 50-Day EMA. If we were to break her all that, then the oil market could go to the $90 level, where we have the 200-Day EMA.Expecting Plenty of Volatility
I do like the idea of fading short-term rallies because quite frankly I think we have seen such destruction in this market that simply“sell and hang on to the position” is probably going to be difficult. I do expect plenty of volatility , especially as we are heading toward the end of the year when liquidity tends to disappear. That tends to make very violent moves in this market, especially as so many algorithms are attached to the futures market. With this, it still looks like there is not an Apple event of the takeoff to the upside, and the lack of demand is going to continue to be a major issue going forward as the world is almost certainly heading into a huge recession.
Remember, oil was the“lifeblood” of the global economy, and if the economy is slowing down there's just no need for it. Alternatively, if we start to see the economy pick up, then oil will be in high demand. Right now, all things are pointing south, but it must be said that a massive amount of selling pressure has already been in the market, so I'm not expecting some type of massive collapse here.
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