Multiple reports hit headlines yesterday regarding positive developments on a coronavirus vaccine. Sky News initially reported that UK scientists made breakthroughs by developing a vaccine which can be tested on animals as early as next week. This was significant because they were able to produce one in 14 days when it usually takes 2-3 years. Meanwhile, in a separate report, researches in Zhejiang University said they had a cure readily available for humans.
Consequently, this news sparked risk appetite. Crude oil price has been heavily hit by the coronavirus outbreak as fears surrounding the disease has led to lower demand for the commodity.
Not even higher-than-expected crude oil inventories kept WTI crude oil price from trading higher. According to the Energy Information Administration (EIA), there was a surplus of 3.4 million barrels of oil last week. It was expected to only be at 2.9 million barrels. Typically, higher numbers are bearish for crude oil price because it suggests that the US will not increase its orders for oil soon.
On the hourly time frame, we can see that WTI crude oil price CFDs have broken resistance. By connecting the highs of January 21, January 22, January 29, January 30, and February 4, crude oil price is now trading above the falling trend line. A closer look at the commodity’s recent price action, we can see that crude oil has been making higher lows following a series of lower lows. An inverse head and shoulders pattern has consequently formed. In forex trading, this is considered as a bullish indicator. Crude oil price is currently testing neckline resistance around the $52.00 handle. A bullish close above this price is needed for the commodity to rally to near-term resistance at $53.28.
On the other hand, a close below yesterday’s New York session lows may invalidate the bullish chart pattern. A drop to $50.40 may indicate that there are still sellers in the market who could push crude oil price to its February 5 low at $49.30.