Crude Soars on Syria Concerns

August crude oil surged on Friday to its highest level in several weeks as the U.S. stepped up its involvement in Syria. The news that the U.S. government is taking a more active role in arming rebels in Syria raised concerns about potential supply issues in the oil-rich region.

Although Syria is not a major oil producer, it is important for the stability of the entire Middle East. This event comes at the right time for bullish traders. Over the past several weeks, investors have been hit with bearish supply/demand forecasts as well as bleak outlooks for the global economy. The action by the U.S. government shifts the focus from broader economic issues to possible military activity.

oil refinery

Other outside influences that could underpin prices or even trigger a spike higher are tensions between Sudan and South Sudan over oil exports, and protests in Libya that have led to a drop in crude oil production.

Technically, aggressive buyers took out two tops today at $97.28 and $97.46, putting the market in a position to challenge the mid-March high at $97.94. The subtle nature of this rally and the quiet breakout could draw the attention of technical buying programs that could drive this market to $100 per barrel rather quickly.

Concerns that the U.S. involvement in Syria could escalate into something major also helped drive August gold prices higher. With the market severely oversold, bullish investors have been waiting for something to reignite the market. Speculators seem to be willing to go back to the traditional way to trade gold, that is, buy it when there is international turmoil.

Technically, the market appears to be forming a support base or a triangle chart pattern. Both of these patterns are non-trending, but also often signal impending volatility.

The EUR/USD held its ground on Friday despite reaching a potential Fibonacci resistance level at 1.3389. The trend is up on the daily chart but like other markets, traders are waiting for the Fed’s decision on June 19.

This morning’s U.S. economic numbers seem to have had very little impact on today’s price action. The reports which some traders described as lackluster failed to generate any meaningful price action. Industrial Production remained unchanged and the Thomson Reuters/University of Michigan consumer sentiment index fell to 82.7 in June from 84.5 in May.

Generally overbought market conditions helped to put in a temporary top in the GBP/USD. Sterling traders remained mixed about whether the Fed will begin curtailing its stimulus program. The recent run-up in the Pound may have been triggered by the thought that the Fed would maintain its current bond buying spree. 

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James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.

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