Crude Oil Week Ahead: China, PMIs, and FOMC Meeting

Key Events

• China: Retail Sales and Industrial Production on Monday, New Loans on Friday
• Flash PMIs: Manufacturing and Services data for the Eurozone, UK, and US on Monday
• FOMC Meeting: Final 2024 decision on Wednesday
• Geopolitical Risks: Middle East reformations and rising tensions

China and PMIs

The Chinese economy remains in focus as markets await updates on oil demand expectations for 2025. Industrial production, retail sales, and new loan data will indicate whether China’s 2024 stimulus efforts have gained traction. Although Chinese equities declined last week after statements that upcoming stimulus measures will mirror previous ones, oil prices climbed above the $70 mark, signaling optimism.

Meanwhile, October PMI data highlighted a bearish outlook for manufacturing and services sectors, keeping oil prices near their 4-year lows. The upcoming flash PMIs for the Eurozone, UK, and US this week may introduce additional volatility risks to currencies like the EUR, GBP, and USD, potentially impacting oil markets.

Geopolitical Tensions Ahead of a Trump Presidency

In addition to the positive impact of China’s policy stance, Trump has vowed to address ongoing Middle East conflicts, threatening harsh measures if resolutions are not reached before his presidency resumes. This has escalated tensions in the region, including the weakening of Iranian proxies and the recent fall of the Assad regime in Syria. These developments increase hedging risks for commodities including oil until concrete resolutions are achieved.

US Data and FOMC

The Federal Reserve’s final rate decision for 2024 is expected to include a 25bps rate cut, reflecting a cautious approach to economic uncertainties in 2025. Despite a recent rise in CPI and PPI data, with US CPI m/m increasing from 0.2% to 0.3% and y/y from 2.6% to 2.7%, the FOMC outlook will likely dominate market sentiment. Traders are looking for insights into 2025 policy shifts ahead of Trump’s presidency, making this week’s Fed decision pivotal.

Technical Analysis: Quantifying Uncertainties

Crude Oil Week Ahead: 3Day Time Frame

Source: Tradingview

Crude oil prices remain confined within a narrow range, oscillating between $66 and $72. The market’s next move hinges on whether the current support zone holds or gives way. Here are two potential scenarios:

Scenario 1: The bearish breakout from the triangle suggests a move toward the full triangle target, aligning with the 0.618 Fibonacci retracement level of the 2020–2022 uptrend at 55. This scenario also aligns with the lower boundary of the down-trending channel, which has been respected and extended from the yearlong triangle pattern. A firm break below 64 can extend the drop towards 58 and 55.

Scenario 2: If the current support zone holds and bullish fundamentals come into play, the first resistance (above 72 and 72.70) could be met at the triangle’s thrust point (where its borders converge) near $78. Further resistance levels could follow at 80, 84, and 88, potentially extending the uptrend toward longer-term targets at 95 and 120.

--- Written by Razan Hilal, CMT on X: @Rh_waves and Forex.com You Tube