As the week comes to an end, Crude Oil continues to command attention with its recent bullish breakout. After months of consolidation, prices have surged, driven by a combination of technical patterns and robust economic data from China, a major global oil consumer. With higher highs and bullish momentum prevailing, market participants are closely monitoring key resistance and support levels, alongside geopolitical developments, to assess the near-term trajectory of crude oil prices.
Overview
As the week comes to an end, Crude Oil continues to command attention with its recent bullish breakout. After months of consolidation, prices have surged, driven by a combination of technical patterns and robust economic data from China, a major global oil consumer. With higher highs and bullish momentum prevailing, market participants are closely monitoring key resistance and support levels alongside geopolitical developments to assess the near-term trajectory of crude oil prices.
Key Economic Events
Friday 09:00 am (GMT+2) - UK: Retail Sales m/m (GBP)
Technical Analysis
After a prolonged three-month consolidation phase, Crude Oil has transitioned into a pronounced upward trajectory, driven by both technical and fundamental factors. A failure swing reversal, where the trough at 68.533 held above the prior low and prices subsequently surpassed the peak at 71.274, marked the onset of this bullish move. The upward momentum was further reinforced as prices sustained levels above the 50-period Exponential Moving Average (EMA).
Higher highs and closing prices above the Upper Bollinger Band signal the continuation of the uptrend, with bullish sentiment dominating the market. The Momentum oscillator remains firmly above the 100 baseline, indicating persistent upward pressure. However, the Relative Strength Index (RSI) has breached the 70 overbought threshold, suggesting the potential for a short-term corrective move or a pause in the current uptrend.
While the bullish trend remains intact, traders should monitor momentum indicators closely for signs of a potential retracement or consolidation. Key levels and market developments will likely define the trajectory in the near term.
Potential Upside Targets
If the bulls maintain control of the market, traders may consider the following four potential upside targets:
81.004: The first resistance is seen at 81.004, which corresponds to the recent high marked on January 15 and coinciding with an internal trendline.
83.745: The second price target is identified at 83.745, representing the weekly resistance, R3, calculated using the standard Pivot Points methodology.
85.181: The third resistance level is established at 85.181, representing the 423.6% Fibonacci Extension drawn from the high point, 71.376, to the low point, 67.110.
87.813: An additional resistance is recognized at 87.813, aligning with a historical peak.
Potential Downside Targets
If the buyers take control of the market, traders may find potential opportunities in the following four downside targets:
78.777: The initial support level is observed at 78.777, reflecting the weekly support, S2, calculated using the standard Pivot Points methodology.
75.875: The second level of support is identified at 75.875, corresponding to the weekly Pivot Point, PP, calculated using the standard methodology.
72.044: The third level of support is 72.044, which corresponds to 61.8% Fibonacci Retracement drawn from the low point, 66.506, to the high point, 81.004.
68.533: An additional support is seen at 68.533, reflecting a swing low marked on December 20.
Fundamentals
China's stronger-than-expected economic data for December 2024, including a 6.2% increase in industrial production and 3.7% growth in retail sales, boosted crude oil prices on Friday. Brent crude futures rose to $81.70, while WTI futures climbed to $78.38.
Market optimism stems from China's 5.4% GDP growth in Q4 2024, the strongest annual rate in 18 months, supported by stimulus measures introduced in September. As a major global oil consumer, China's economic rebound is expected to drive higher crude demand.
Meanwhile, geopolitical developments, including a potential ceasefire in the Red Sea and evolving US policies on sanctions, are contributing to market dynamics, with supply risks providing additional support for oil prices.
Conclusion
Crude Oil's bullish momentum remains intact, supported by robust technical indicators and China's economic rebound. As prices test key resistance levels, traders should remain cautious of potential short-term retracements signaled by overbought conditions in momentum indicators. Geopolitical developments, including potential shifts in US sanctions and supply risks, add further complexity to market dynamics. With critical economic data and technical patterns in play, crude oil's trajectory will likely hinge on a delicate balance of global demand, policy developments, and investor sentiment.