FUNDAMENTAL
OVERVIEW
The risk premium
that traders had started pricing in after reports of potential US strikes on
Iran before the midterm elections, is being unwound after yesterday’s de-escalation.
In fact, Trump said on Truth
Social that the US was having productive discussions with Tehran and would not
attack Iran before the midterm elections.
This was a good
example of how markets work. They price and reprice future expectations based
on the incoming information. The escalation risks triggered a strong rally in
crude oil on expected retaliations and disruptions, while the de-escalation
reversed the earlier expectations and traders unwound their hedges or speculative
longs.
Looking ahead, Iranian Foreign Minister Araghchi said yesterday that
Tehran was reviewing Washington’s response to Iran’s proposal and expected to
reply within the next few days. A positive outcome would lead to a major
selloff in oil prices on expected supply improvement, while a negative outcome
wouldn’t change much at this point, although it would likely limit the downside
in crude.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil(CFD contract) is pulling
back a bit after the de-escalation in tensions following Trump’s post. If the
price pulls all the way back to the lower bound of the channel, we can expect
the buyers to step in again, with a defined risk below the channel, to keep
targeting the 110.00 resistance. The sellers, on the other hand, will want to
see the price breaking lower to pile in for a drop into the 68.00 support next,
with the 80.00 level as the first target.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that the break of the downward trendline opened the door for a rally into the
96.77 level. If the price gets there, we can expect the sellers to step in,
with a defined risk above the level, to position for a drop back into the lower
bound of the channel. The buyers, on the other hand, will look for a break
higher to increase the bullish bets into the 110.00 resistance next.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see the price broke below the minor upward trendline after Trump’s post as
traders started to unwind the earlier escalation premium. We have another
trendline around the 89.50 level that could act as support. The buyers will
likely step in there too, with a defined risk below the lower bound of the
channel, to keep pushing into the 96.77 level. The sellers, on the other hand,
will need to wait for a break below the channel to open the door for new lows. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
Todaywe
conclude the week with the University of Michigan Consumer Sentiment survey,
although it’s not expected to be a market-moving release. The focus will remain
on US-Iran developments.
This article was written by Giuseppe Dellamotta at investinglive.com.