ATFX: Trump says he has negotiated with Iran; U.S. crude oil falls below $90

Topic: ATFX Forex Column Submission

March 24, ATFX: Last Saturday, U.S. President Trump issued a 48-hour ultimatum to Iran. If Iran cannot comply with U.S. demands to reopen the Strait of Hormuz, the U.S. will carry out a fierce strike. Just as market participants were judging how intense the U.S. attack would be after the 48 hours, a dramatic reversal suddenly appeared.

On Monday this week, Trump told the media, “We are speaking with a leader we believe is the most respected. The conversation happened yesterday and continued until late last night.” Trump said the dialogue was “very good and productive,” so he will suspend strikes on Iran’s energy facilities for five days.

The reversal came too suddenly for market participants to have expected. Crude oil plunged, while gold surged violently higher. The logic behind crude oil’s plunge is very simple: if the U.S. and Iran begin a negotiation process, the Strait of Hormuz will most likely be reopened. That would sharply increase supply on the international oil market, which is bearish for oil prices.

The logic behind gold’s rebound is a bit more complicated, but it is still clear. After international oil prices fall, the probability of the high inflation that the U.S. was expected to face due to high oil prices will decline significantly. Without the sense of crisis from high inflation, the Federal Reserve will likely continue making large and sustained rate cuts according to Trump’s ideas—bullish for gold.

The problem is that on Iran’s side, nobody has acknowledged that they have communicated with Trump. This makes Trump’s remarks look like a grand lie. Iran Islamic Consultative Assembly Speaker Kalibaf and Iran’s Foreign Ministry spokesperson Baghaei both denied having communicated with Trump.

It is still unclear what Trump will explain about this, but U.S. crude oil has already started its downtrend, and the $90 integer level has been broken.

▲ATFX figure

As for market conditions, at the daily chart level, after a round of explosive rally, U.S. crude oil is currently in a sideways trading phase at high levels. Although, due to Trump’s remarks, U.S. crude oil fell below the $90 integer level yesterday, as long as today does not continue the sharp sell-off, the high-level range-bound state can still persist. U.S. crude oil’s medium-term high is $113.03. The time at which this level was formed was March 9—one week after the outbreak of the U.S.-Iran conflict. The medium-term low is $61.74, occurring on February 17, before the outbreak of the U.S.-Iran conflict.

At present, the crude oil price action is dominated by news developments. As for the resistance level of the medium-term high point or the support level of the medium-term low point from a technical perspective, the actual effect may not be ideal. We believe that as long as the Strait of Hormuz has not been fully reopened, it will be difficult for international oil prices to effectively fall below the $90 level. Even if there is a brief break through, it will most likely resume the uptrend after the rumors dissipate.

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责任编辑：陈平