Key Events
- China: Retail Sales and Industrial Production data will be released on Monday, followed by New Loans on Friday.
- Flash PMIs: Preliminary Manufacturing and Services indices for the Eurozone, UK, and US are due on Monday.
- FOMC Meeting: The Federal Open Market Committee will make its final rate decision for 2024 on Wednesday.
- Geopolitical Risks: Developments in the Middle East remain a concern amid rising tensions.
China and PMIs
The spotlight is on China's economic indicators as anticipation builds for insights into oil demand projections for 2025. Upcoming reports on industrial production, retail sales, and new loans will be crucial to assess the effectiveness of China's stimulus measures in 2024. Last week, Chinese stocks saw a dip after officials indicated that forthcoming stimulus efforts would closely resemble previous programs; however, oil prices surged past the $70 threshold, reflecting cautious optimism in the market.
In parallel, data from October's PMI indicated a negative outlook for both manufacturing and services sectors, resulting in oil price stagnation around four-year lows. Flash PMIs for the Eurozone, UK, and US this week may add further volatility to exchange rates such as EUR, GBP, and USD, consequently affecting oil market dynamics.
Geopolitical Tensions Ahead of a Trump Presidency
Alongside a supportive policy stance from China, former President Trump has promised to address the persistent conflicts in the Middle East, threatening tough measures if resolutions are not found before his potential return to office. This rhetoric has heightened tensions across the region, impacting actors like Iranian proxies and leading to significant changes, such as the recent decline of the Assad regime in Syria. Such developments contribute to increased hedging risks for commodities, particularly oil, until tangible resolutions are reached.
US Data and FOMC
The Federal Reserve's imminent rate decision for 2024 is anticipated to include a 25 basis point cut, reflecting a careful assessment of economic uncertainties heading into 2025. Recent Consumer Price Index (CPI) and Producer Price Index (PPI) figures have shown slight increases, with the US CPI MoM rising from 0.2% to 0.3% and YoY moving from 2.6% to 2.7%. Nevertheless, the FOMC's outlook is expected to drive market sentiment as traders gauge possible policy shifts in 2025, particularly with Trump on the horizon.
Technical Analysis: Quantifying Uncertainties
Crude Oil Week Ahead: 3-Day Time Frame
Source: Tradingview
Crude oil prices remain trapped in a tight range, fluctuating between $66 and $72. The market's trajectory will depend on the durability of the current support zone. Two scenarios are possible:
Scenario 1: A bearish breakout from the triangle pattern may suggest a downward shift towards the full triangle target, which corresponds with the 0.618 Fibonacci retracement level of the 2020–2022 uptrend at $55. This scenario aligns with the lower boundary of the downward channel, which has been respected since the yearlong triangle formation. A decisive break below $64 may lead to declines towards $58 and $55.
Scenario 2: If the support zone holds firm and bullish fundamentals emerge, resistance can be expected at the triangle's thrust point, near $78, with further resistance at $80, $84, and $88. This bullish case could potentially set the stage for an extended uptrend towards long-term targets at $95 and $120.
