Oil, Natural Gas, and US Dollar Technical Analysis: CPI Data, OPEC Cuts, and Geopolitical Tensions

The US Dollar (DXY) shows strength, supported by rising US yields and steady economic data. Market participants also considered the potential for further gains tied to the “Trump trade.” The US dollar continues to rise after the release of October’s Consumer Price Index (CPI) readings. As per the data, the headline inflation remained stable at 0.2% monthly, while the annual rate peaked at 2.6% from 2.4%. Core inflation remained steady monthly at 0.3%, reinforcing the Fed’s cautious approach. Despite the Federal Reserve’s data-dependent approach, recent inflation figures suggest a stable economic outlook. This has led traders to reduce expectations of an interest rate cut in December.

Oil prices have significantly declined over the past few sessions. Investor sentiment weakened in response to China’s underwhelming fiscal measures, which failed to boost demand optimism. Concerns over supply disruptions in the Gulf of Mexico have eased as Tropical Storm Rafael has dissipated. Meanwhile, OPEC cut its global oil demand growth outlook for 2024 for the fourth consecutive month, citing slowing demand from China and a global shift towards cleaner energy sources.

Moreover, the US API weekly crude oil stock report shows an unexpected decline in crude inventories by 0.777 million barrels, against a forecasted increase of 1.000 million barrels. This lower-than-expected inventory suggests stronger demand. However, WTI crude oil (CL) prices show uncertainty due to the global shift in energy demand and geopolitical tensions in the Middle East. On the other hand, natural gas (NG) prices are breaking from the strong resistance, which opens the door for upward momentum.

WTI Crude Oil (CL) Technical Analysis

Oil Daily Chart – Descending Broadening Wedge

The daily chart for WTI crude oil indicates building bearish pressure within a descending broadening wedge pattern. The red circle within this pattern highlights the accumulation of bearish pressure, suggesting a potential decline toward the $62 support level. The downward momentum will continue if the price remains below $76. However, the price rebounded from this short-term support after the US API weekly crude oil stock report.

Oil 4-Hour Chart – Bearish Pressure

This bearish pressure in the oil market is also observed on the 4-hour chart, where each rally reverses after forming rounding tops. A break below the black trend line could open the door toward $65.60. The RSI approaches its lower boundary as the price nears the black support line, indicating a potential rebound from these levels.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Breakout from Triangle Pattern

Natural gas prices hit the strong resistance of the triangle line and consolidated around this resistance area. The price consolidates at this resistance level while awaiting the next directional move. A break above $2.80 would signal upward momentum. The double bottom formation around the $2.20 area highlights the potential for an upward breakout.

Natural Gas 4-Hour Chart –Resistance Area

The 4-hour chart shows price consolidation at the resistance area. This resistance is defined within the $2.66 to $2.80 range. The overall market remains bullish, but this consolidation is due to overbought conditions indicated by the RSI. A break above $2.80 would likely trigger a strong upward move.

US Dollar Technical Analysis

US Dollar Daily – Bullish Momentum

The daily chart shows that the US dollar continues its upward momentum following the release of CPI data. The index is breaking the resistance of 106.5 and moving to 107. A move above 107 would pave the way for a long-term rally in the US dollar, potentially adding pressure on commodities. The 50 and 200 SMAs are trending upward, but the 50 SMA is still below the 200 SMA, indicating a consolidating market. Therefore, an upward breakout above 107 is unlikely in the short term.

US Dollar 4-Hour Chart – Ascending Channel

The US dollar is trending upward within an ascending channel on the 4-hour chart. The price approaches the short-term resistance but remains strong. As the market adjusts to Trump’s victory, the US dollar will likely remain strong in the short term.