Oil prices remained relatively stable despite an early rise, as the market corrected lower during the day. Although US-Iran negotiations in Pakistan broke down over the weekend, hopes for renewed diplomacy and a more lasting ceasefire supported calmer price action in energy markets. Fragile ceasefire expectations remain the key driver behind market sentiment.
At the same time, the USD continued to lose ground as easing war-related fears reduced demand for safe-haven assets, while US equities and Bitcoin gained support from improving risk sentiment. However, with uncertainty still high, markets remain vulnerable to sudden shifts in headlines surrounding the fragile ceasefire outlook.
Oil prices remain stable
Despite a rise at yesterday’s open, oil prices corrected lower during the day. Despite a breakdown of US-Iranian negotiations in Pakistan over the weekend, market hopes for a possible lasting ceasefire deal through diplomacy were enhanced. For the time being, a stick and carrot US approach seems to be maintained by US diplomacy on Iran and we expect negotiations to restart and further de-escalation could weigh on oil prices. On the flip side, negotiations fall through and the scenario of a resumption of hostilities start nearing we may see oil prices rising.
Xlence Research Team opinion
At the current stage, we see the chances of negotiations bringing some more concrete results wider than the chances of a renewal of hostilities. Yet any scenario is still highly uncertain and ups and downs on the road to a more permanent ceasefire, are expected, so buckle up.
WTI H4 Chart
- Support: 96.80 (S1), 94.80 (S2), 76.90 (S3)
- Resistance: 107.15 (R1), 119.40 (R2), 130.00 (R3)
We maintain a bias for a sideways motion for WTI’s price action as the commodity’s price action cannot avoid the gravity exercised by the 96.80 (S1) support line. It’s characteristic how the RSI indicator remains near the reading of 50 implying a rather indecisive market and the narrowing of the Bollinger bands tends to imply an easing of volatility for WTI’s price action, which could allow the sideways motion to continue. Yet WTI price action could change direction any time soon, given the volatility of the fundamentals surrounding it. Should the bears take over we may see WTI’s price breaking the 96.80 (S1) support line and start aiming if not breaching the 94.80 (S2) support level.
USD’s safe haven status weighs
In the FX market, the USD continued to lose ground against its counterparts. Overall the easing of the market’s anxieties about the war in Iran, guided investors is divesting from the USD which is considered a safe haven in favour of riskier assets. Overall, we expect fundamentals which could include the Fed’s monetary policy intentions and the developments in the in the war in Iran to be the catalyst behind the direction of the USD, given also the low number of high impact financial releases from the US that are scheduled during the week.
Xlence Research Team opinion
Overall we see the case for USD to continue weakening in the FX market as long as the market worries about the war in Iran continue to ease. Any escalation of the war could enhance investors’ flight to safety and thus provide some support for the greenback. Also any indication that the Fed may keep a tight monetary policy for longer could provide support for the USD.
USD/JPY H4 Chart
- Support: 157.50 (S1), 154.30 (S2), 152.10 (S3)
- Resistance: 160.50 (R1), 164.40 (R2), 168.00 (R3)
Despite not being representative of the situation in the FX market we chose USD/JPY as it seems to reflect a battle of the weakest. Both JPY and the USD are losing ground for different reasons each locking the pair’s price action in a sideways motion between the 160.50 (R1) resistance line and the 157.50 (S1) support line. Any breaking of the prementioned levels could signal the beginning of a bullish or bearish outlook respectively.
US stock markets seem to recover their confidence
US stock markets were on the rise yesterday as the market mood improved by the enhanced expectations for a more stable ceasefire between US and Iran. We also highlight the kick off of the earnings season as a possible catalyst for US equities’ direction. Goldman Sachs released its earnings report yesterday and Wells Fargo, Citigroup and JPMorgan released their reports today, while tomorrow in the premarket hours we get the earnings reports of Bank of America and Morgan Stanley.
Xlence Research Team opinion
Overall we note that should market worries about the war in Iran ease further, we may see US stock markets getting more support and vice versa. Also should we see the revenue and EPS figures to be included in the earnings reports outperforming market expectations, we may see the confidence of US stock markets being enhanced and thus being on the rise.
US 500 Cash H4 Chart
- Support: 6805 (S1), 6710 (S2), 6630 (S3)
- Resistance: 6900 (R1), 7015 (R2), 7100 (R3)
On a technical level, S&P 500 rose and seems to have hit a ceiling on the 6900 (R1) resistance line. The RSI indicator has reached the reading of 70, implying a strong bullish market sentiment for the index, and at the same time, may imply that the index’s price action is at overbought levels and ripe for a possible correction lower. Should the bulls maintain control as expected, we may see the index breaking the 6900 (R1) resistance line and start aiming for the 7015 (R2) resistance area.
Bitcoin on the rise
Overall Bitcoin got some support from the improved market sentiment yesterday and during today’s Asian session. Analysts are highlighting the possibility of the cryptocurrency king starting to rebound and preparing for further gains. Yet we tend to remain somewhat sceptical and remain relatively cautious. In any case, for the time being, we link the rise of the cryptocurrency’s rise to the improved market sentiment created by the enhanced market expectations of a possible ceasefire deal in the war in Iran.
Xlence Research Team opinion
Should we see the market sentiment improving further, we may see Bitcoin’s price getting further support given the riskier nature of cryptocurrencies. On the flip side a more cautious market sentiment could weigh on the crypto market.
BTC/USD H4 Chart
- Support: 72750 (S1), 70330 (S2), 67730 (S3)
- Resistance: 75950 (R1), 79240 (R2), 84320 (R3)
BTC/USD was on the rise since the start of the week, breaking the 72750 (S1) resistance line, now turned to now to support. The RSI indicator has risen reaching the reading of 70, implying a strong bullish market sentiment for the cryptocurrency’s price. At the same time, Bitcoin’s price may have neared overbought levels and thus the scenario of a possible correction lower cannot be excluded. Yet we tend to maintain a bullish outlook for Bitcoin at the current stage and if actually so, we may see Bitcoin’s price action reaching if not breaching the 75950 (R1) resistance level.
Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication.
