Brent Oil outlook: Extends steep rally on deteriorating geopolitical situation

Slobodan Drvenica Windsor Brokers

Brent Oil

Brent oil rose to the highest since early May on Friday, extending strong bullish acceleration from $110 zone into second consecutive day (the contract advanced 2.6% on Thursday and additional 1.4% on Friday morning).

Growing threats that the situation in the Middle East (Yemen and Iran) could completely run out of control if conflicts escalate, continue to fuel worries about further supply disruption that resulted of rise in oil price of nearly $5 in less than two days.

Final break above strong $110 barrier (which capped several attacks in mid-Sep and this week) generated strong bullish signal, opening way towards targets at $119.29 (Fibo 76.4% of larger $138.22/$58.00, 2022/2025 downtrend) and $120 zone (peaks of March / psychological).

Brent is on track for the fourth consecutive weekly gain and likely weekly close above $110 pivot, with increasingly supportive fundamentals contributed by bullish technical studies.

Immediate target lays at $115.37 (Fibo 138.2% projection of the upleg from $95.11), followed by $117.10 and $118.83 (150% and 161.8% projection respectively).

However, overbought daily studies and potential profit-taking at the end of the week may slow bulls for consolidation / limited pullback.

Bullish near-term structure should remain intact while the price holds above $110.

Res: 115.37; 117.10; 118.83; 119.70.
Sup: 112.72; 111.06; 110.00; 109.60.

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold holds above $4,000/three-month low as Fed hike bets and firm USD cap upside

Gold struggles to capitalize on its modest recovery from levels below the $4,000 psychological mark, or a three-month low set earlier this Friday, and retains a bearish tone through the first half of the European session. Federal Reserve officials recently signaled there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again at its December policy meeting.

Bitcoin, Ethereum, and Ripple rebound as major support levels cap recent sell-off

Bitcoin, Ethereum and Ripple rebound modestly on Friday after correcting and testing their key support zone the previous day. BTC holds the 50-day EMA, ETH finds support around the 100-day EMA, while XRP holds the horizontal floor near $1.300. The price action of these top three cryptocurrencies suggests a recovery if this critical support zone holds; a decisive close below these levels suggests a deeper correction.

US S&P Global PMI expected to show moderating business activity in October

The United States S&P Global preliminary Purchasing Managers Indices for October will be released on Friday, providing fresh insights into the health of the world's largest economy ahead of next week's Federal Reserve monetary policy meeting. The report includes the Manufacturing PMI, Services PMI and Composite PMI, which measure business activity across the private sector.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.