Advertisement
Advertisement

Oil, Natural Gas, and US Dollar Technical Analysis: Weak China Retail Sales Signal Demand Risks

By:
Muhammad Umair
Published: Dec 17, 2024, 01:41 GMT+00:00

Key Points:

  • WTI crude oil (CL) breaks above the apex of the triangle pattern but remains within the consolidation zone.
  • Natural gas (NG) consolidates within a tight range near the $3.60 resistance level.
  • The US Dollar Index consolidates between 105.60 and 107.00.
Oil, Natural Gas, and US Dollar Technical Analysis: Weak China Retail Sales Signal Demand Risks

In this article:

WTI crude oil (CL) remains volatile and has hit resistance at $71.40. The price started to correct from this resistance level. Disappointing Chinese retail sales data for November drove the correction from this level, which grew only 3%. The chart below highlights a decreasing trend in China’s retail sales over the past year. The November retail sales data fell below expectations, dampening hopes for a swift economic recovery.

Moreover, tanker rates on major routes to China have plunged to the lowest level this year, signalling weakening demand. Despite ongoing production cuts by OPEC+ and lower refinery activity in China, the global oil market remains well-supplied, according to the International Energy Agency (IEA).

On the other hand, the US Dollar Index (DXY) currently trades around 107.00, with slight softness as traders rebalance positions ahead of the Federal Reserve’s critical interest rate meeting tomorrow. A mixed set of economic data from the US has created a cautious outlook. The S&P Global Composite PMI rose to 56.6 in December, reflecting strong growth in services, while the Manufacturing PMI dipped to 48.3, showing continued contraction. At the same time, last week’s inflation data, including higher-than-expected Producer Price Index (PPI) figures, underscored persistent price pressures, keeping the Fed’s policy decisions under the spotlight.

Traders are closely watching positioning data. Managed money net long positions in WTI crude fell by 12,448 lots last week, indicating a cautious sentiment, while ICE Brent saw fresh speculative longs. With thin liquidity at year-end and global uncertainties, oil and the US dollar remain sensitive to further economic data and central bank decisions. The price uncertainties in the oil market are also affecting natural gas (NG) prices, which are consolidating below the $3.60 resistance area.

WTI Crude Oil (CL) Technical Analysis

Oil Daily Chart – Consolidation

The daily chart for WTI crude oil indicates that the price is trading within a complex triangle pattern and nearing the apex. Although the market managed to break above the black-dotted trendline, it failed to surpass the $72.20 resistance level. The price remains in a consolidation phase; however, it may gain positive traction in the short term due to its close above the 50-day SMA and the RSI holding above the midline.

Oil 4-Hour Chart – Neutral Trend

The 4-hour chart for WTI crude oil shows that the price has broken out of the triangle pattern and reached the immediate resistance at $71.40, defined by the red-dotted trendline. A breakout above $71.40 could push WTI crude oil toward the $72.50 level.

Natural Gas (NG) Technical Analysis

Natural Gas Daily Chart – Cup and Handle

The daily chart for natural gas (NG) shows the formation of a cup and handle pattern. The breakout from this pattern has pushed the price to a resistance zone at $3.60. After reaching this resistance area, the price has entered a consolidation phase and maintains a bullish outlook. The breakout above the neckline of the cup and handle at $3 initiated this consolidation over the past month. This consolidation is building positive momentum, and a break above $3.60 could ignite a rally in natural gas prices.

Natural Gas 4-Hour Chart –Ascending Channel

The 4-hour chart for natural gas indicates that the price is trading within an ascending channel. The recent correction from the $3.60 resistance level has found support at the midline of this channel. Notably, this marks the fourth touch at the midline, and the price is currently rebounding higher after testing this level. If natural gas drops below $3, the next support zone lies between $2.70 and $2.60, where a potential rebound could push prices back toward the $3.60 level.

US Dollar Technical Analysis

US Dollar Daily – Consolidation

The daily chart for the US Dollar Index shows that it has been consolidating below the 107 resistance level for the past month. This consolidation has created a resistance zone, with the Index awaiting a clear directional move. The consolidation range is formed between the red trendline and the black trendline. The next decisive move is expected to occur within this range. A break below 105.60 could push the Index toward the 103.40 level. Conversely, a breakout above 107 could drive it higher toward the 109 level.

US Dollar 4-Hour Chart – Ascending Channel

The 4-hour chart for the US Dollar Index shows that it is trading within an ascending channel. The rebound from the 105.60 level has formed a double bottom pattern, pushing the Index toward the blue-dotted trendline. As long as the Index remains above 105.60, the upward momentum in the US Dollar Index is likely to persist.

 

About the Author

Muhammad Umair, PhD is a financial markets analyst, founder and president of the website Gold Predictors, and investor who focuses on the forex and precious metals markets. He employs his technical background to challenge the prevalent assumptions and profit from misconceptions.

Advertisement