Crude Oil futures technical analysis – January 24, 2025

Introduction

In our previous analysis, we anticipated a potential breakout in crude oil futures (CL) if the price could sustain momentum above certain resistance levels. Since then, crude has rallied sharply but failed to hold above the descending trendline resistance, leading to a pullback below the trendline again. Let’s see what the technicals are telling us.

Fundamental overview

U.S. Dollar Strength

• The U.S. dollar has gained strength following hawkish comments from Federal Reserve officials so interest rates may remain elevated longer than expected. This has put downward pressure on oil prices, as a stronger dollar makes crude more expensive for non-dollar holders.
• Investors remain cautious as the dollar index (DXY) continues to push higher, dampening the outlook for commodities.

Crude Oil Supply and Demand Factors

• Reports suggest that OPEC+ may consider maintaining current production levels amid concerns of slowing global demand growth, adding to market uncertainty.
• Rising U.S. crude inventories, as reported by the Energy Information Administration (EIA), have also contributed to the recent sell-off.
• Geopolitical tensions remain a wild card, with potential supply disruptions still a factor, but have not yet provided sustained support to prices.

Technical Analysis Overview

Key Developments Since Previous Analysis:

• Price broke above the 200-day SMA (74.96) and the descending trendline but failed to sustain above these levels, leading to a pullback.
• The 50-day SMA at 71.36 is now a key short-term support level to watch.
• The MACD has turned bearish.

Support and Resistance Levels

Resistance Levels:

1. 74.96 (200-day SMA) – Price is currently testing this level; a failure to hold above could lead to a downward move back to 71.50.
2. 75.30 (recent swing high) – A breakout above this level is required to resume the bullish trend.
3. 77.00 – Key upside target if bullish momentum resumes.

Support Levels:

1. 71.36 (50-day SMA) – Immediate support.
2. 69.50 – 70.00 – Support zone.
3. 67.00 – A break below this level would invalidate the bullish structure and signal further downside risk.

Scenarios to Watch

Bullish Case:

• A hold above the 200-day SMA (74.96) and a breakout above the descending trendline could target 75.30 and higher toward 77.00, resuming the uptrend.
• Positive geopolitical developments or supply concerns could support prices in the near term.

Bearish Case:

• Continued rejection from 74.96 and a drop below the 50-day SMA at 71.36 could accelerate selling pressure, targeting the support zone around 69.50 – 70.00.
• Further strengthening of the U.S. dollar could cap upside potential.

Trade Ideas

Bullish Setup:

• Entry: Long positions on a confirmed breakout above 75.30, targeting 77.00.
• Stop-Loss: Below 74.00 to manage downside risk.