Oil prices sink as expectations for an imminent US-Iran deal increase. What’s next?
FUNDAMENTAL
OVERVIEW
Crude oil sold off hard yesterday following reports that
Pakistan’s
Chief of Army, Asim Munir, was carrying a proposal to Iranian leaders that
included the removal of the US naval blockade and gradual lift of sanctions
under the Islamabad Memorandum of Understanding.
Even though it wasn’t the first time we got such
positive news, markets saw a stronger probability a potential deal due to the
fact that US President Trump spoke with Munir ahead of his trip. Moreover, Pakistani
officials described the visit as fruitful, with the outcome of the discussions
expected to become clearer soon.
The losses then extended later in the day when Russia’s
RIA Novosti reported that the US and Iran would announce a new ceasefire
agreement in the coming days that would include freedom of shipping via
Hormuz.
Finally, the US
has started returning its diplomats to Gulf states, suggesting Washington
does not expect further military escalation and might just try squeeze Tehran
via economic sanctions.
Overall, the outlook for the oil market is more neutral
to bearish at this point, even if no deal is announced in the coming days.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil sold off hard yesterday as expectations for an imminent
US-Iran deal strengthened. We will likely need an actual deal to see oil prices
extending the losses below the key 78.00 support zone.
If the price gets there
without a deal, we can expect the buyers to step in with a defined risk below
the support to position for a rally into new highs. 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.
CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, the
price is rejecting the swing low around the 80.00 handle. The buyers will
likely step in here with a defined risk below the level to position for a rally
into new highs. The sellers, on the other hand, will want to see the price
breaking lower to extend the drop into the 78.00 support.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor resistance zone around the 83.30 level. After the strong selloff,
we might see a pullback on profit-taking into the resistance. If the price gets
there, the sellers will likely step in with a defined risk above the resistance
to position for a drop into new lows, while the buyers will look for a break to
increase the bullish bets into new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we have the US PCE price index. Tomorrow, we get the US Jobless Claims
figures. On Friday, we conclude the week with Fed Chair Warsh’s speech at the
Jackson Hole Symposium. Traders will continue to focus mostly on US-Iran
developments.
This article was written by Giuseppe Dellamotta at investinglive.com.