Crude oil erased all the war gains. What’s next?

Crude oil yesterday erased quickly all the war gains as the final Iran’s retaliation took place. The market reacted immediately as the retaliation was seen as just a show much like we saw in 2020 with Soleimani. The selloff was aggressive as the de-escalation has been the base case all along and we just needed a catalyst to trade it.

Now that this chapter is closed, the focus will switch back to global growth. The market was already supported by positive growth expectations before the conflict started. In fact, we have Fed rate cuts ahead, Trump’s “big, beautiful bill” and further de-escalation in trade war and so on. These are all positive drivers for demand.

In the bigger picture, the market might remain rangebound between the 60 and 90 levels, but the path of least resistance should be to the upside.

On the daily chart, we can see that as we broke below the key 72.00 zone, the sellers piled in aggressively to target a drop into the 65.00 support zone. This is where the buyers stepped in with a defined risk below the support to position for a rally back into the 80.00 level. If the price breaks further below the 65.00 support zone, we can expect a deeper correction into the 55.00 level.

On the 1 hour chart, we can see that the bearish momentum waned right at the support zone. This is where we can expect the sellers to square their positions and the buyers to step in. We might end up consolidating around these levels for quite a bit though after the recent volatility, but this zone will likely be key for the market.

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