Morning Market Check – Energy infrastructures attacked in Iran, Bank of Canada holds rates, & US PPI

This morning marks a busy start to a busy day with Volatility taking another upside turn.

Starting chronologically, a first event has changed the price action in Energy and overall Commodities Markets – As the US-Iran-Israel War continues, now in its 19th day, strategies are evolving and are facing further escalation.

After eliminating major IRGC and Basij Generals, the US and Israel launched waves of attack against Gas infrastructures in Iran, particularly the South Pars Gas Fields, which stand very close to Qatar, and the Emirate was not happy about it, as Iran pledged to respond against (more) energy facilities in the Gulf.

According to this piece, this could be a strategy to punish European and Asian countries and other nations for failing to make the necessary decisions to protect the Strait of Hormuz – not a surreal take, as these countries are the most affected by such Natural Gas and Crude supply disruptions.

In any case, this has led to a solid bounce in Oil, also hurting the broader Markets

WTI is forming what resembles the beginning to form a range, with the overnight rally just stalling right around yesterday's highs – But it still seems early to say.

Note: Right as I'm about to post this, WTI is moving to its session highs – Keep a close eye on the $100 level!

What is for sure, is that the fundamentals once again took over the technicals, a classic of Wartime unpredictability.

The Head & Shoulders noted yesterday is now void – Watch if a range between $92 and $99 forms or if $100 breaks again.

Technical Levels for WTI for FOMC trading

Resistance Levels

• $99.20 morning highs! (broke previous day highs)
• $98 to $100 Resistance (testing)
• $101.20 Globex Open highs
• $106 to $108 June 2022 Resistance
• War highs $116 to $120

Support Levels

• Key Momentum Pivot $93.00 to $95 (range lows bearish below)
• 2H 50-period MA $96.33
• $92.70 Overnight lows
• 2025 Highs Key Support $78 to $80
• $69 to $70 Main Support
• 2025 lows $55.00

The chart is not looking good, particularly if you consider that this is past month data and that things could be looking even uglier next month, with the War adding a 30% premium to Crude prices.

This would be the nail in the coffin for US Rate cuts in 2026, but we will learn more on the issue during the FOMC event (14:00 ET).

For now, Bonds and Stocks are down but not reacting much to the news – Rises in Crude have a larger influence.

But in any case, it's Metals that are taking the hit as Participants await for the Fed – Check out why right here.

The Bank of Canada just held rates for the 3rd consecutive meeting at 2.25% – Nothing really new in the Statement except for some provisions for change if the Middle East conflict was to span for longer – The BoC is looking for more clarity if they want to move rates further.

Economic risks have been marked to the downside, inflation to the upside due to to energy prices – You can access the full statement right here.

The Canadian dollar is holding strong after initially falling slightly – It's still supported by Oil prices and that should remain for the time being.

For those interested, Macklem is going to appear in a few minutes.

Safe Trades as the FOMC approaches!

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