Following the reduced tension regarding Russia and the Ukraine, both WTI and Brent quickly gave back their initial gains from the start of the week. With the WTI-Brent spread reducing and WTI looking the more bullish of the two, will WTI manage to 'close the gap'?
The daily timeframe remains in a steady uptrend, however yesterday's close did produce a Dark Cloud Cover reversal beneath the 105 resistance zone. This in itself does not suggest a reversal, but rather near-term weakness which may play to as a retracement or sideways trading.
At the currency level we are still above last week's close, which also forms part of a pennant/flag formation to suggest a continuation. Yesterday’s low closed the weekend gap so at present we have 2 contrasting arguments, both perfectly plausible.
Whilst yesterday's sell-off was aggressive, we are now hovering above a decent confluence of support. This zone comprises the bullish trendline, 200EMA and horizontal S/R. Therefore despite the sell-off I fancy the chances of this holding and for the trend to resume.
Conversely if this 'reliable' level of support breaks to the downside then we can assume a decent sell-off to target 101.76 and 101.
With USD data and Crude Oil inventories out later we can expect some volatility, but as always let price be your guide.
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