Crude oil is extending the
gains into new highs this week as the market quickly faded the pullback
triggered by Trump’s waiver of Russian sanctions. The main driver continues to
be the situation in the Middle East where the stalled US-Iran negotiations and
the ongoing Saudi-Houthi conflict keep the risk premium elevated.
The Houthis said yesterday
that they launched several attacks on Saudi energy, airport and military
targets. This conflict intensified sharply recently and has been one of the
main drivers of higher oil prices. A de-escalation would likely send crude oil
lower and potentially erase October’s gains.
On the US-Iran talks front, there was a report yesterday from Al-Arabiya saying that a breakthrough in US-Iran negotiations is
expected to be announced this week. It’s not the first time we’ve had such
vague reports that eventually failed to live up to expectations, so take it
with a pinch of salt, but be prepared to adjust positions if we do get a surprise
breakthrough.
It goes without saying
that a breakthrough would trigger a strong selloff in crude oil which could
quickly drop back to pre-war levels. A prolonged stalemate or a re-escalation,
on the other hand, will continue to keep the market supported.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil(CFD contract) broke above
the 96.77 level, retested it, and extended the gains into new highs as the buyers
piled in to target the 110.00 resistance. If the price gets there, we can
expect the sellers to step in, with a defined risk above the resistance, to
position for a drop back into the lower bound of the channel.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a minor upward trendline defining the bullish momentum. The buyers will likely
continue to lean on the trendline, with a defined risk below it, to keep
pushing into new highs. The sellers, on the other hand, will look for a break
lower to extend the drop into the lower bound of the channel.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the buyers will continue to have a better risk to
reward setup around the trendline, while the sellers will need a break below
the trendline and the 96.77 level to target a deeper pullback into the lower
bound of the channel. The red lines define the average daily range for today.
UPCOMING CATALYSTS
On
Thursday we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the Flash US PMIs. The focus will remain on the Middle
East developments.
This article was written by Giuseppe Dellamotta at investinglive.com.