The agreement between the West and Iran really beat a record: the number of days of continuous negotiation extended to 18. But what counts is that the first and perhaps the most complex stage was exceeded. The reaction of the price of oil was for some surprising as the quotations started to rise. There is a possibility that we may have witnessed the phenomenon of buy the rumor and sell the news, but there are also some mentions in the contract that disappointed buyers on the short term. Here are some of the most important facts:
- First of all, the agreement has to be discussed in Congress, where President Obama has announced that it will use his veto power to force an understanding;
- By December, Iran will have to provide details about its nuclear capabilities;
- Iran has to reduce 50 times the holdings of uranium and destroy two-thirds of centrifuges, which enrich uranium to the level that can be used for nuclear weapons;
Concerning the production, Iran needs at least 6 months in order to increase its production and probably this is the reasons why oil has not decreased, but increased shortly after the announcement. There is also a geopolitical factor involved as Israel is not satisfied with the agreement and suggested that it will use its own means to block the development of nuclear weapons.
The price of both the WTI and Brent oil increased, but didn’t manage to overcome the local resistance level. Even though the recent data from China announced an increase of the GDP to 7% and the Industrial Production also rose to 6.8% (fact that encouraged the price to rise), the Iran nuclear talks will proceed, influencing the quotation, and the fundamental factor of the oversupply will also continue to affect the price.
Another important fact concerning the financial markets represents of course Greece. Monday morning an agreement was announced, which seems to contain even more severe terms than proposed in the referendum which was rejected. The money promised to Athens represents 86 billion Euros, which would avoid bankruptcy and ensure capitalization of banks in the first stage, but markets are not fully convinced that this would entirely solve the problem. An International Monetary Fund study published on Tuesday showed that Greece needs far more debt relief than European governments have been willing to contemplate so far. Today, Alexis Tsipras need to obtain the approval of the Parliament in order to proceed with the implementation of the reforms and then obtain the European money.
EURUSD is sitting quietly above the 1.0915 – 1.0948 support level, while the German index DAX managed to rise up to 11530 points. A breakout of the local maximum of 11650 points would enforce the ascending trend, while a fall down to 11200 points would rather encourage the continuation of the descending tendency or at least a lateral movement.
