Crude oil opened the week
lower and extended the losses as optimism around a US-Iran deal to reopen the Strait
of Hormuz strengthened. In fact, Iran has proposed a two-day framework to
reopen the Strait of Hormuz in exchange for US concessions, including sanctions
relief, the release of frozen assets and changes to the US military presence.
This is a shorter
timeline that the seven-day framework proposed a month ago. The markets
interpreted the shortened timeline as a positive development, although the US
has not accepted the proposal yet and negotiations continue. Meanwhile, the
conflict between Saudi Arabia and the Houthis continues to escalate, while Russia
and Ukraine extended the reciprocal attacks on energy infrastructure.
US-Iran negotiations are
of course the most important thing for markets, so a breakthrough will likely
lead to a significant selloff, while setbacks should keep oil prices supported.
A de-escalation in the Saudi-Houthi conflict could also trigger a correction,
although the downside would be limited by US-Iran stalemate.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil (CFD contract) opened the
weekly lower today and extended the losses as hopes for a US-Iran deal
strengthened. If we get a pullback into the lower bound of the channel, we can
expect the buyers to step in, with a defined risk below the channel, to
position for a rally into the 110.00 resistance. The sellers, on the other
hand, will want to see the price breaking lower to increase the bearish bets
into the 68.00 support next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see the price broke below the upward trendline and it’s now testing a key support
around the 99.50 level. We can expect the buyers to step in around the support,
with a defined risk below it, to position for a rally into the 110.00
resistance. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets 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 have a better risk to reward setup
around the support, while the sellers will need a break to extend the pullback
into new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have
the US ISM Manufacturing PMI. Tomorrow, we have the US Job Openings data and
the US midterm elections. On Wednesday, we have the US ADP and the US ISM
Services PMI. On Thursday, we get the latest US Jobless Claims data. On Friday,
we conclude the week with the US NFP report and the University of Michigan
Consumer sentiment survey.
This article was written by Giuseppe Dellamotta at investinglive.com.
