While the price of oil had a particularly positive second quarter this year, its failure to clear the 60-62 dollars per barrel area led to a vicious reversal from late June to early August, which could lead to a retest of the 7-year low below $43.
The price of oil is particularly significant for commodity-sensitive currencies and especially the currencies of major oil producers such as Norway, Russia, Canada and Mexico.
Price action has clearly been bearish as the Tenkan-sen line has remained below the Kijun-sen and price is well below the Ichimoku cloud. The fact that price has fallen that far below the cloud however could indicate that the fall has been overextended. The fact that the cloud is thin and far above the current price, could also mean that any upside correction would have some room to run before running into significant resistance.
On the downside, the 7-year low of 42.80 will be an important point to watch. Further on, the round number of $40 could be attractive from a psychological point of view.
To sum up, the chart is definitely bearish although recent falls appear overextended and shorts should be aware of the risk of sudden and large upside corrections which could lead to stop-loss buying.
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