Crude oil continues to range as de-escalation remains the base case

This week has been all about the Israel-Iran conflict given the lack of macro changes on other fronts like economic data or central bank decisions.

After the spike following the first Israel attack against Iran, the market got stuck in a range as traders focused on the eventual de-escalation as it happened many times in the past. We indeed had signs of that happening with the latest news saying that Trump would make a decision whether to attack Iran within two weeks (which looks too long if you are actually serious about attacking).

The conflict per se is not that much of an issue for the market as long as it doesn’t impair oil supply. In fact, traders are just monitoring the situation for direct US involvement or closure of the Strait of Hormuz. These two are the most important factors for the market right now.

On the daily chart, we can see that the price couldn’t break above the major trendline and consolidated just above the key 72.00 zone. We will likely continue to range here until we get stronger signals of a de-escalation or an increase in hostilities with a direct US involvement or the closure of the Strait of Hormuz.

On the 1 hour chart, we can see more clearly the recent rangebound price action with the buyers stepping in around the 72.00 zone to keep targeting new highs. The sellers will need the price to break below this zone to pile in for a deeper pullback into the 65.00 level next.

This article was written by Giuseppe Dellamotta at www.forexlive.com.