Despite a sharp correction from its July highs, Crude Oil has found firm support above the $66.00 mark and recently formed a reversal pattern, signaling potential further upside. Technical indicators are reinforcing the bullish bias, with the Momentum Oscillator and RSI both holding above their neutral thresholds. Key resistance levels lie between $72.968 and $77.913, while support levels stretch down to $66.742, offering reference points for traders on both sides of the market. Fundamentals reflect a delicate balance between improving economic signals in China and ongoing demand concerns, setting the stage for potentially volatile moves into the coming weeks.
Overview
Despite a sharp correction from its July highs, Crude Oil has found firm support above the $66.00 mark and recently formed a reversal pattern, signaling potential further upside. Technical indicators are reinforcing the bullish bias, with the Momentum Oscillator and RSI both holding above their neutral thresholds. Key resistance levels lie between $72.968 and $77.913, while support levels stretch down to $66.742, offering reference points for traders on both sides of the market. Fundamentals reflect a delicate balance between improving economic signals in China and ongoing demand concerns, setting the stage for potentially volatile moves into the coming weeks.
High Impact Economic Events
Thursday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Thursday 18:00 (GMT+2) - USA: Crude Oil Inventories (USD)
Friday 17:00 (GMT+2) - USA: ISM Manufacturing PMI (USD)
Technical Analysis
After reaching a high of $84.677 per barrel on July 5, Crude Oil experienced a significant decline, losing more than 21% of its value. Despite this sharp drop, Crude Oil has managed to find support above the $66.00 level over the past three months.
Recently, the price action has formed a failure swing reversal pattern, with a breakout above the important resistance level of $71.274, which paves the way for further price appreciation. Specifically, the trough at $68.533 held above the prior trough, followed by a breach of the $71.274 peak, indicating the potential for continued upward movement.
Supporting this bullish outlook, technical indicators such as the Momentum Oscillator and the Relative Strength Index (RSI) remain firmly above their neutral thresholds of 100 and 50, respectively. This signals increasing upward pressure and the likelihood of further gains.
Potential Upside Targets
Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:
72.968: The initial price target is 72.968, which represents the 161.8% Fibonacci Extension drawn from the swing high, 71.274, to the swing low, 68.533.
73.861: The second price target is identified at 73.861, corresponding to the weekly resistance, R3, calculated using the Pivot Points methodology.
75.509: The third target is established at 75.509, aligning with the 261.8% Fibonacci Extension drawn from the swing high, 71.274, to the swing low, 68.533.
77.913: An additional price target is estimated at 77.913, which corresponds to the daily high from October 7.
Potential Downside Targets
Should the sellers take market control, traders may consider the four potential support levels listed below:
71.274: The first level of support is determined at 71.274, representing the swing high from December 13.
70.074: The second support level is identified at 70.074, reflecting the weekly Pivot Point, PP, calculated using the standard methodology.
68.533: The third support is 68.533, mirroring the swing low marked on December 20.
66.742: An additional downward target is observed at 66.742, corresponding to the weekly support, S3, calculated using the standard Pivot Points methodology.
Fundamentals
Oil prices edged higher, supported by expanding Chinese manufacturing activity, but are set to end the year lower for a second consecutive time amid demand concerns, according to Reuters.
China's economy showed signs of stabilization with manufacturing growth and plans for record treasury bond issuance, but demand uncertainty continues to weigh on oil markets. OPEC+ delayed production increases to 2025, while the IEA predicts global supply will outpace demand next year.
Short-term support could come from declining US crude inventories, though a stronger dollar and the US Federal Reserve's rate path are expected to impact demand into 2025.
Conclusion
In conclusion, Crude Oil markets are navigating a complex interplay of technical resilience and mixed fundamentals. While price action and technical indicators suggest potential for further upside, broader demand uncertainties and macroeconomic factors, such as US monetary policy and global supply dynamics, remain key drivers of volatility. Traders should monitor upcoming economic events and price levels closely as they provide critical guidance for market direction in the weeks ahead.