Crude Oil declined amid worries about lower consumption, geopolitical turbulence, high interest rates, and economic uncertainty. At the same time, US commercial Crude Oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week.
Overview
Crude Oil declined amid worries about lower consumption, geopolitical turbulence, high interest rates, and economic uncertainty. At the same time, US commercial Crude Oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.2 million barrels from the previous week. Traders will be closely monitoring the Crude Oil market due to the release of significant economic data later today and next week that could impact the price of Crude.
High Impact Economic Events
Friday 01:30 am (GMT+0): Manufacturing PMI (CNY)
Friday 12:30 pm (GMT+0): GDP m/m (CAD)
Friday 12:30 pm (GMT+0): Core PCE Price Index m/m (USD)
Technical Analysis
Crude Oil has been following a downward path since May 1, when the price formed a reversal to the downside, known in technical analysis as a failure swing. Specifically, the price formed a peak at 84.778, failing to exceed the previous peak of 87.113, and subsequently fell below the trough of 81.115, thus opening the way for a downtrend. The bearish outlook agrees with the Exponential Moving Average (EMA) and the Momentum oscillator. In particular, prices are traded below the 50-period EMA while the Momentum oscillator registers values below the 100 baseline.
Potential Downside Targets
If the bearish momentum continues to dominate the market, traders may find potential opportunities in the following four downside targets:
76.486: The initial price target is seen at 76.486, corresponding to the trough marked on May 24.
75.188: The second price objective stands at 75.188, aligning with the 261.8 percent Fibonacci Extension drawn from the trough of 81.115 to the peak of 84.778.
74.369: The third potential downside target is estimated at 74.369, representing the second support (S2) utilizing the weekly Pivot Points methodology.
69.151: An additional support is identified at 69.151, corresponding to the 423.6 percent Fibonacci Extension drawn from the trough of 81.115 to the peak of 84.778.
Potential Upside Targets
If the bulls manage to take control of the Crude Oil market, traders may consider the following three potential upside targets:
81.115: The initial upside target stands at 81.115, aligning with the trough of the failure swing, marked on April 22.
82.388: The second upside target is 82.388, which corresponds to the second (R2) resistance level utilizing the weekly Pivot Points methodology.
84.778: An additional potential price objective could be identified at 84.778, representing the peak marked on April 26.
Fundamentals
In April 2024, pending home sales saw a 7.7% decrease, with all regions of the US reporting lower numbers compared to both the previous month and the previous year. In fact, home sales dropped to the lowest level in four years.
The Bureau of Economic Analysis published figures yesterday showing that the gross domestic product increased by 1.3% in the first quarter of the year, which is lower than the previous estimate of 1.6%. Personal spending increased by 2.0%, down from the previous estimate of 2.5%. These numbers highlight a slowdown in the early months of 2024. Persisting high interest rates and slower income growth are putting pressure on American households and businesses.
Conclusion
Plummeting home sales, slower consumer spending, persisting high interest rates, and geopolitical events have put a lot of strain on the world economy, raising concerns about global consumption and Crude Oil demand.
The existing downward trend indicates that Crude Oil prices might continue to decline, underscoring the significance of prudently handling market risks. Remaining informed about economic developments and geopolitical shifts is essential for making well-informed trading choices in financial markets.