NEW YORK (Reuters) - U.S. crude oil futures fell below a key technical support level at $88.55 a barrel on Wednesday, breaching the 61.8 percent Fibonacci retracement of their October to March rally and threatening to intensify selling by triggering stop losses.
U.S. crude fell to a low of $87.98, before recovering slightly to trade at $88.02 a barrel by 10:38 a.m. EDT (1438 GMT), down $2.74 on the day on fears about the future of Spain's banks and fading hopes for a Chinese stimulus package.
Technical analysts at Barclays Capital said in a note to clients on Tuesday evening that if prices remain weak into the end of the week, U.S. crude could soon fall to $80 a barrel.
"A move below $89.15 in U.S. crude and a weekly close below $106.20 in Brent would ... resume weakness toward 80.00 and 100.00, respectively," Barclays technical analysts led by Jordan Kotick in New York said.
Prices are down more than $22 a barrel since hitting $110.55 on March 1, as fears over the health of the euro zone have intensified.
Over the same period, London Brent crude prices have fallen from $128.40 a barrel to below $104 a barrel as of Wednesday, the lowest price since December 2011.
Analysts also pointed to a drop in the euro to below $1.25 as a key cross-market support point for riskier assets such as commodities. That level gave way on Tuesday and selling accelerated on Wednesday, taking the single currency to a near two-year low against the dollar of $1.2408.
The Thomson Reuters-Jefferies CRB index .CRB, a global benchmark for commodities, fell 1.4 percent as oil, copper and gold declined.
The price fall for U.S. crude futures and Brent since the beginning of May has been the biggest month-long selloff since the peak of the financial crisis in October 2008.
The selloff has taken both contracts below all of the major medium-term support levels, with the 200-day moving average on U.S. crude now at $96.44 a barrel.
The extent of the selloff has led some market analysts, however, to say a number of technical indicators now show an oversold oil market.
The relative strength index, which rises and falls depending on the strength of buying and selling, has been below 30 for U.S. crude oil futures since May 11, falling to 23.15 on Wednesday. A reading below 30 indicates a contract is oversold, while a reading above 70 indicates it is overbought.
Analysts have indicated that the next big support line for the euro is $1.235, which could spark a bounce in markets if it holds. The next big support line for U.S. crude is seen around $85 a barrel.
(Editing by Dale Hudson)
This story was corrected to have the first paragraph to read "October to March rally" instead of "March to October"