United States Oil (USO) spikes after Iran attacks US forces
The price of oil spiked Wednesday (Jan 8) after Iran launched revenge attacks on US forces in Iraq, making good on its pledge to hit back over the killing of its top general.
The main US contract rocketed by more than 4.5 per cent as fears over supplies in the tinderbox Middle East sent prices soaring.
The Pentagon said it was still “working on initial battle damage assessments” after bases at Ain al-Asad and Arbil in Iraq – which house US and coalition forces – were targeted by more than a dozen ballistic missiles.
There were no immediate reports on casualties. US President Donald Trump said the assessment was underway, but added on Twitter: “So far, so good”.
Iranian Foreign Minister Mohammad Javad Zarif said on Twitter that Tehran had “concluded proportionate measures in self-defence”.
“We do not seek escalation or war, but will defend ourselves against any aggression.”
West Texas Intermediate and Brent Crude later pared their gains. At around 0300 GMT WTI sat at US$63.63 up 0.93 per cent, and Brent was at US$69.34, 1.10 per cent up.
Oil markets have been unsettled since Friday’s killing in a US drone strike of Iranian general Qasem Soleimani, one of the most important figures in the country’s government.
The assassination sparked an outpouring of rage and grief in Iran, along with a growing drumbeat of threats of revenge, and warnings of a possible war that could engulf much of the Middle East.
Safe haven assets also rose Wednesday as investors dumped stocks and headed to the hills.
Gold was up more than 2 per cent, surging above US$1,600 an ounce for the first time in six years, before falling back slightly.
The Japanese yen, where investors traditionally take refuge in times of uncertainty, was also up, adding fuel to the fire in Tokyo, where the Nikkei 225 index plunged more than 2.5 per cent in early trade.
Developments including confirmation of US casualties could lead to further movements, said Gain Capital market analyst Matt Simpson.
“You can pretty much get the sentiment from gold. It is holding above US$1,600. If there is confirmation that there are US casualties, it could go higher,” he said. “If it does look like we’ve got US casualties, then I don’t think Trump is going to just stand back and take that.
“World War III has been thrown around. I don’t think we’re there yet. But it does look like Iraq II.”
Other analysts warned equities would take a hit, especially in Asia.
“Expect equities to take a hit, especially in imported energy-dependent Asia,” said OANDA Senior Market Analyst for Asia Pacific Jeffrey Halley. “Airline stocks will be out of favour today because of oil, but that won’t be the whole story.
“The potential closure of the Straits of Hormuz – Iran has plenty of land-based anti-ship missiles – will severely disrupt oil supplies from the Middle East.”
He added: “We may also see next week’s signing of the interim US-China trade agreement in Washington DC delayed.”
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 12.28.
The projected upper bound is: 13.66.
The projected lower bound is: 12.66.
The projected closing price is: 13.16.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 74.2194. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.79. This is not a topping or bottoming area. However, the RSI just crossed below 70 from a topping formation. This is a bearish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 0 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 115.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed down -0.030 at 13.130. Volume was 35% below average (neutral) and Bollinger Bands were 15% narrower than normal.
Open High Low Close Volume___
13.100 13.180 13.010 13.130 14,878,481
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 12.93 12.22 12.06
Volatility: 18 27 38
Volume: 13,042,518 18,615,070 25,160,538
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND is currently 8.9% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into USO (mildly bullish). Our trend forecasting oscillators are currently bullish on USO and have had this outlook for the last 47 periods.