Fundamental Analysis
Iran nuclear deal is a big news for oil traders. The deal has tremendous importance for Iran, which has been crippled under sanctions for years and now the picture does certainly look rosy for the country and there is a strong probability that the country will be able to develop its strong foundation once again. Although, it may take a certain length of time to become fully equipped with an ability to produce oil at its optimum level, but, Iran does have a significant amount of oil reserve which is ready to hit the market. This is like a plane on the runway ready to take off. Therefore, it will only add to the oil glut on the market and increase the selling pressure.
Saudis will certainly not feel very thrilled with this deal and this could make the US and Saudi Arabia’s relation even more fragile. Moreover, Saudi’s are not going to wide open the quota of oil for Iran as a member of OPEC, nevertheless, this is a different question if Iran will give any second thoughts to those quotas given that Saudi Arabia is already pumping record amounts of oil and alienating other members. For Iran their number one priority is to build their economy and they will leave no stone unturned in achieving this,
Technical Analysis
The price has strong bias towards the downside as it is trading well below the 50 and 100 day moving average (shown in yellow and red). Although, there is clear negative divergence between price and the RSI indicator, which means that while the price is making the lower low, the RSI is not confirming this move at all. Therefore, the downward move is backed up my momentum and it could fade soon.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam