Crude Falls Following Weak China Data
Oil prices have stabilised for now on the back of heavy selling over the last fortnight which has seen the futures market reversing lower by 10% from the YTD highs. Despite currently trading in the green, sentiment remains broadly bearish against a backdrop of negative factors. A weaker set of Chinese PMI data at the start of the week has diluted confidence in the economic rebound there following better data recently, weighing on the demand outlook for crude.
Trump Tariff Impact
Alongside weaker China data, oil prices are also being pressured this week by surge in rhetoric from Trump on tariff action. Following a quiet first week of his presidency where he failed to deliver the tariff’s he’d threatened to action on day one, Trump has taken a more aggressive tone this week. Trump declared that he was in favour of pursuing an increase in global tariffs from 2.5% to as high as 20%. These comments helped drive fresh buying in USD and have put pressure on commodities across the board, reviving the prospect of trade wars ahead of Trump’s Feb 1st tariff deadline for Canada and Mexico.
Fed On Watch
Crude traders will also be keeping an eye on the Fed this week. While no change in policy is expected, traders will be monitoring the Fed’s guidance on rates which is likely to drive near-term USD direction. If The Fed is seen leaning to the dovish side this cold help support crude prices through the back end of the week via a softer US Dollar. However, if the Fed pushes back against rate cut expectations, given the tariff backdrop, this could see USD firmly higher near-term, sending crude prices lower.
Technical Views
Crude
The sell off in crude has stalled for now into a test of the 72.61 level support. However, sentiment remains heavy and with momentum studies bearish, risks of a fresh push lower are seen. Below here, 67.45 is the next support to note. Topside, 77.64 remains the key barrier for bulls to breach to regain momentum.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.