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.