Middle East in Focus
Volatility in oil prices remains elevated through early European trading on Tuesday as traders continue to monitor ongoing developments in the Israel-Iran conflict. Further drone and missile attacks from both sides have been seen over the last 24-hrs, with little sign that the conflict is likely to be resolved. Trump has urged Tehran to evacuate ahead of a planned escalation in Israeli attacks with some chatter that the US might join the war. For now, the market remains highly sensitive to incoming headlines and any fresh escalation in the conflict should see oil prices spiking higher. Similarly, any news that the two sides are willing to negotiate or agree a ceasefire will see oil prices dropping sharply lower as traders unwind current risk premium.
USD & Fed Impact
Oil prices are also being supported by a weaker US Dollar on Tuesday. Rising global geopolitical threats and near-term Fed easing expectations are keeping DXY anchored to lows for now. The risk of a fresh break lower in USD remains high and oil prices stand to rally firmly if a move lower is seen in response to the FOMC tomorrow. While the Fed is expected to keep rates on hold, traders will be looking for guidance on the likely scope and scale of future, expected rate cuts. If the Fed leans to the dovish side, USD is at risk of further weakening, creating support for oil prices. If the Fed takes a more hawkish stance, however, oil prices should weaken somewhat as USD rallies.
Technical Views
Crude Oil
The rally in crude has stalled for now into a test of the bear channel highs and the 77.69 level. The reversal lower has seen price move back under the 72.61 level, putting 67.45 in sight as next support, in line with falling momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.