Prices gapped down further on Monday due to the increased likelihood of Iran deal came to light. The goal of the negotiations are to reduce the time it takes Iran to make enough enriched uranium fuel for a single weapon from an estimated 2-3 months, to 12 months. In exchange Iran will have sanctions removed, which includes the export of oil. The renewed expectation of a deal has seen pressure return to oil prices with a deal likely to see prices accelerate to the downside.
Of course, if a deal is not met, we are likely to see oil prices bounce higher.
Technically the gap down today places it outside of a potential Bearish Flag / Channel. The Channel would target the 55.45 lows whereas as a Bear Flag would project a target well into the lower 40's. For now, the upper target would be more sensible and for us to monitor the strength and weakness of the USD (which also has a busy calendar this week).
- Friday close produced a Spinning Top candle to suggest a swing high has been seen
- Monday's gap down adds extra credence to the Spinning Top candle
- The 59.85 high respected a 50% retracement
- A cluster of resistance between 58.25 - 58.63 could provide areas to consider fading into
- Initial targets are 57.57; 56.37; 55.45
Oil poised to slip further
The combined effect of increased supply and the likelihood of an Iran deal, WTI and Brent price could be in for another painful week.