FUNDAMENTAL
OVERVIEW
Oil prices recouped all
last week’s losses as risks of a US-Iran conflict increased. In fact, we got
a report from
Axios suggesting
that a war between the U.S. and Iran now appears increasingly likely. According
to the sources cited, there is currently no sign of a diplomatic breakthrough
between Washington and Tehran which is irritating Trump.
They also noted that, given
Trump’s recent military build-up and escalated rhetoric, it may be difficult
for him to de-escalate without Iran offering significant concessions on its
nuclear program. The report added that any military operation in Iran would be
massive, involving a weeks-long campaign that would resemble a full-fledged
war.
If a military conflict were
to break out, we would see oil prices skyrocket due to the risk of disruption
in the Strait of Hormuz, especially in light of the recent military drills. Traders
are piling in into oil longs given the weekend risk.
In fact, the Axios report
added at the end that U.S. officials said after Tuesday’s talks that Iran needs
to come back with a detailed proposal in two weeks. But here’s the kicker: last
June, the White House set a two-week window for Trump to decide between further
talks or strikes. Three days later, he launched Operation Midnight Hammer.
Another important event is tomorrow’s
potential US Supreme Court decision on Trump’s tariffs. In fact, if the Supreme
Court were to rule against the tariffs, we will likely see oil prices surging on
positive growth expectations.
CRUDE OIL
TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that crude oil bounced at the support zone around the 62.35 level and it’s
now approaching the key 66.43 resistance. That’s where we can expect the
sellers to step in with a defined risk above the resistance to position for a
drop back into the support. The buyers, on the other hand, will look for a
break higher to increase the bullish bets into the 70.50 level next.
CRUDE OIL TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see more clearly the rangebound price action between the 62.35 support and the
66.43 resistance. Market participants will likely continue to play the range
until we get a breakout on either side.
CRUDE OIL TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s
not much we can add here as the sellers will likely step in around the
resistance to position for a drop back into the support, while the buyers will
look for a breakout to extend the rally into the 70.50 level next. The red
lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the latest US Jobless Claims figures. Tomorrow, we conclude the
week with the US Q4 GDP, the US PCE price index for December, the US Flash PMIs
and a potential US Supreme Court decision on Trump’s tariffs. Watch out for
US-Iran headlines as well.
This article was written by Giuseppe Dellamotta at investinglive.com.