On Tuesday, crude oil gained 4.15% after China's central bank cut interest rates.
Thanks to this news, light crude reversed and invalidated Monday’s breakdown under the support line. Despite this move, the commodity still remains under the barrier of $40. Will it stop further improvement in the coming days?
Yesterday, crude oil moved higher after the market’s open supported by news that the People’s Bank of China cut interest rates by 25 basis points to 4.6% and the reserve requirement ratio for large lenders by 0.5% to 18.0%. As a result, light crude rebounded in the following hours, climbing to an intraday high of $39.89. Will we see an invalidation of the breakdown under $40 in the coming days? (charts courtesy of http://stockcharts.com).
Quoting our last Oil Trading Alert:
(…) we should keep in mind that, yesterday’s downswing approached crude oil to the upper green support zone marked on the weekly chart below. Taking this fact into account, we think that corrective upswing from here should not surprise.
Looking at the weekly chart, we see that the situation developed in line with the above scenario and crude oil moved little higher (compared to the preceding declines).