Fundamental Overview
Crude oil rallied strongly on Tuesday following the first news of an imminent missile attack from Iran against Israel. We had also the US ISM Manufacturing PMI release with the new orders index ticking higher in a potentially first sign of an improvement in demand.
Yesterday, crude oil extended the gains as we got the news that Israel could target Iran’s oil infrastructure in a potential retaliation. That also triggered a breakout of a key resistance which increased the bullish momentum.
In the big picture, central bank easing generally leads the manufacturing cycle, so we can expect global growth to pick up, especially after the Fed’s 50 bps cut and the Chinese officials surprising with strong easing measures.
All these reasons should be bullish for the market and support prices in the next months barring a recession. As a reminder, the positioning in crude oil is at record lows and the sentiment is still very bearish. These factors can generally offer great contrarian opportunities when we get to an inflection point in the fundamentals.
Crude Oil Technical Analysis – Daily Timeframe
On the daily chart, we can see that crude oil finally broke above the key 71.67 resistance and extended the rally into the major trendline where we can also find the 61.8% Fibonacci retracement level for confluence.
This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop back into the 71.67 level, while the buyers will want to see the price breaking higher to increase the bullish bets into the 80.00 handle.
Crude Oil Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have now a minor upward trendline defining the current bullish momentum. If the price were to pull back, we can expect the buyers to lean on the trendline to position for new highs, while the sellers will look for a break lower to increase the bearish bets into the 65.00 handle.
Crude Oil Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more clearly the recent price action with the major spikes higher triggered by the Israel and Iran tensions. There’s not much else we can add here as the buyers will look for a bounce around the trendline or a break above the 75 handle, while the sellers will want to see a stronger rejection and a break below the minor upward trendline. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US NFP report where the consensus sees 140K jobs added and the unemployment rate to remain unchanged at 4.2%.
