Crude oil has been edging higher recently amid the lack of concrete breakthrough
in US-Iran negotiations.
Qatar said yesterday that it secured at least two weeks for diplomatic
efforts, adding that significant differences remain. So, the expectations for
an imminent deal should be repriced and that will likely lead to a rebound in
oil prices.
Crude oil fell significantly following the US midterm elections on the
wrong assumptions that the Republicans’ loss would force Trump to wrap up the
Iran war quickly. The reality is that Trump can continue the war without Congress.
Moreover, it’s not even logical to leave now that he doesn’t have anything to
lose.
We can argue that
the midterm loss has made things even worse for negotiations as Iran got
emboldened by the Democrats victory. Tehran continues to insist on their terms,
but the US has never considered those acceptable. So, the stalemate could drag
on more than expected and Trump could also consider limited strikes against nuclear
facilities rather than broader attacks on energy infrastructure.
It goes without saying that a concrete breakthrough would trigger a
significant selloff and take oil prices back to pre-war levels relatively
quickly. But an escalation, on the other hand, could trigger another rally on a
rising risk premium, although there’s also a chance that it could be
short-lived if Trump launches limited strikes just to save face before exiting
the war.
For now, I think the downside in oil prices remains limited and we could
actually erase all the losses since the US midterm elections if the stalemate
extend further.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil(CFD contract) is rising back
above the key 87.00 handle. The buyers will likely pile in around these levels,
with a defined risk below the 87.00 handle, to position for a rally into the
110.00 resistance. The sellers, on the other hand, will want to see the price falling
back below the level to extend the drop into the 80.00 handle next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see the price is breaking above the downward trendline that was defining the
bearish momentum. The buyers will likely pile in on the break, with a defined
risk below the most recent low, to position for a rally into the 110.00 resistance,
with the 92.50 level as the first target. The sellers, on the other hand, will
want to see the price falling back below the trendline and the 87.00 handle to
pile in for a drop into the 80.00 level next.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the buyers will likely pile in around these levels
to extend the rebound into the 92.50 level, while the sellers will wait for the
price to fall back below the key technical levels to extend the drop into the
80.00 handle next. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrowwe
get the latest US Jobless Claims figures. On Friday, we conclude the week with
the US PPI data. The focus will remain on US-Iran developments.
This article was written by Giuseppe Dellamotta at investinglive.com.