Oil prices extend losses and target pre-war levels amid expectations of Hormuz reopening
FUNDAMENTAL OVERVIEW
The surprising US-Iran breakthrough last Thursday triggered a selloff in crude oil as traders started to unwind the hedges and positioned for lower prices on expectations of resumption of normal traffic in the Strait of Hormuz in the coming months.
As mentioned last week, the downside was more likely as the upside was capped by the risk of Fed tightening into a negative supply shock and potentially triggering a recession or Trump caving in and making a deal.
We got the second scenario which is certainly better for the global economy. The natural target now should be the pre-war levels around the 70.00 handle, all else being equal.
The risks in the short-term is that things between the US and Iran break down and the Strait of Hormuz remains closed, so traders will have to keep a close eye on that.
CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that crude is approaching the key 78.00 support zone. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally back into the upper bound of the range around the 115.00 level. The sellers, on the other hand, will look for a break to increase the bearish bets into the pre-war gap around the 68.00 handle.
CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a downward trendline defining the bearish momentum. If we were to get a pullback into the trendline, we can expect the sellers to lean on it with a defined risk above it to keep pushing into new lows. The buyers, on the other hand, will look for a break to increase the bullish bets into new highs.
CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we have another minor trendline defining the bearish momentum on this timeframe. If we get a pullback into the gap, we can expect the sellers to step in to target a break below the 78.00 support and extend the drop into the 68.00 handle next. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the next trendline around the 90.00 handle. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Tomorrow, we have the FOMC rate decision. On Thursday, we get the latest US Jobless Claims figures. On Friday, the US-Iran “peace deal” is expected to be signed.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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