Brent crude opened with a lower gap on Monday and fell to the lowest level in more than three months, hit by a new wave of optimism about the end of the US-Iran war.
The two sides announced that they had reached a preliminary agreement scheduled to be signed next Friday.
The potential end of the war and the reopening of the strategic Strait of Hormuz provided strong relief after the three-month conflict had severely damaged global energy supplies and depleted reserves (about 20 million barrels per day pass through Hormuz).
The technical picture on the daily chart has weakened further, as the bearish leg that emerged after failing below the $100 psychological barrier has accelerated in the past three sessions and registered a weekly close below the next strong support at $90/$89 (round figure/previous higher base/50% retracement at $58.70/$119.47).
Strong negative momentum and the convergence of the 10/100DMA, on its way to forming a bearish crossover, heighten the bearish outlook, although a warning that bears may start to face headwinds comes from an oversold stochastic and a falling RSI touching the border of the oversold zone.
Rallies in the current environment should be limited and ideally remain below the $90 area, to provide better re-entry levels into the bear market.
Immediate support is located at $81.91 (Fibo 61.8%) / $80.00 (round number) followed by $77.74 (200DMA) and $73.04 (Fibo 76.4%) in the extension.
Accuracy: 86.08; 89.09; 90.00; 91.54
sip: 81.91; 77.74; 75.76; 73.04
