Fundamental
Overview
Crude oil rallied strongly last
week following the tensions in the Middle East between Israel and Iran. We also
got some key technical breakouts that increased the bullish momentum.
Last Friday, we also got a strong US NFP report which cast aside recessionary fears and strengthened the case for a future pick up in activity amid the Fed’s easing.
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, positioning in crude oil is still near record lows.
Crude Oil
Technical Analysis – Daily Timeframe
Crude Oil Daily
On the daily chart, we can
see that crude oil broke above the major trendline and extended the gains into new
highs as the bullish momentum increased. The target for the buyers should now
be the 80 handle where we can expect the sellers to step in to position for a
drop back into the 70s.
Crude Oil Technical
Analysis – 4 hour Timeframe
Crude Oil 4 hour
On the 4 hour chart, we can
see that we now have 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 position for a drop back into the 72 handle.
Crude Oil Technical
Analysis – 1 hour Timeframe
Crude Oil 1 hour
On the 1 hour chart, we can
see that we have the upper bound of the average daily range for today standing right around the
key 77.50 swing level. If the price extends into the swing level we can expect the
sellers to step in for a pullback into the minor trendline, while the buyers
will likely continue to lean on the trendline to keep targeting new highs.
Upcoming
Catalysts
This week the calendar is a bit empty on the data front. The main events are all
scheduled for the latter part of the week. On Thursday, we have the US CPI and
the US Jobless Claims. On Friday, we conclude with the US PPI and the
University of Michigan Consumer Sentiment report.