Mapping the Market: Signs of relief at US gasoline pumps, possibly more to come

June 16 (Reuters) – U.S. gasoline prices have fallen more than 20% since their Iran-war peak in April, with the latest declines encouraged by the announcement of a deal to ​end hostilities, and they could slide further if a pattern forming on ‌the charts comes to fruition.

Click here for a more detailed chart., opens new tab

The price action in U.S. gasoline futures since the start of the war has carved out what technical analysts call a head-and-shoulders pattern — ​one of the most widely recognized signals that a market may be reversing ​course. Think of it as a silhouette: two smaller peaks, the shoulders, ⁠flanking a taller central peak, the head. When prices fall below the base connecting ​the two shoulders, known as the neckline, it typically signals more losses ahead.

In this case, ​the left shoulder formed around March 23 near $3.40, the head peaked on April 30 at about $3.82, and the right shoulder has been taking shape in the $3.20–$3.25 area. The neckline sits near $2.90. If the ​pattern plays out fully, the measured move lower would be around $0.90, potentially dragging prices ​down to the $2.00–$2.10 range, where they traded before the war began.

A momentum indicator called the Relative Strength ‌Index, ⁠or RSI, is also pointing lower, though it is approaching oversold territory, meaning the right shoulder may need more time to develop. Notably, RSI also failed to confirm the April peak — a divergence traders read as a warning that the rally was losing steam.

As ​with many markets, gasoline ​prices have been ⁠sensitive to Iran-war developments and may continue to be so until the deal is fully sealed and subsequent negotiations take place. To ​signal a return to higher prices, gasoline would need to climb ​back above $3.40.

What ⁠the chart shows:

(Daily markets commentary from ​Reuters analysts on the signals financial charts are sending – and what they might mean.)