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Date: 17th April 2025.


Economic Data Lifts Crude Oil — Will Resistance Stall the Rally?



Trading Leveraged products is Risky


Crude Oil prices rise for a second consecutive day due to supply chain concerns and positive Chinese data. The price of Crude Oil rose 1.58% on Wednesday, and a further 1.15% during this morning’s Asian session. However, this upward price movement has taken the asset to the key resistance level at $62.70. Is the price about to witness a decline due to the current resistance level?


Why are Oil Prices Increasing?


One of the main reasons why Crude Oil prices have been increasing in value is the positive economic data from China. China and the US hold the biggest influence over Crude Oil demand as the two countries are the largest importers. China's first quarter’s gross domestic product (GDP) grew by 5.4%, surpassing the projected 5.2%. However, analysts attribute this growth to a surge in demand for Chinese goods ahead of the anticipated tariff war and predict a potential slowdown by year-end.


Nonetheless, the oil market reacted positively to the news that the Chinese economy saw better figures than previously expected. Traders will be watching closely to see if deteriorating economic data in the coming months, driven by trade policy, will put downward pressure on prices.



Crude Oil


The US also made public positive economic data from Retail Sales. The Retail Sales figure rose by 1.4%, the highest in more than 12 months. The Core Retail Sales also rose by 0.5%, higher than the projected figure and the previous month.


Furthermore, the US, UK and Japan have confirmed they will begin negotiating a trade agreement with the US. The tone is positive and can have a positive impact on the price of Oil. However, the key factor for the Oil market is whether the US will come to an agreement with China. In terms of supply, Iraq and Kazakhstan have announced additional output cuts to keep supply controlled. In addition to this, the US is imposing additional sanctions on Iranian oil which is further pressuring the supply side. Restrictions on supply chains are known to push prices higher.


The Federal Reserve and How the Economy Will Influence Crude Oil?


Even though economic data surprised the market and provided a positive tone for many assets, the Federal Reserve was less positive. The Chairman, Mr Jerome Powell spoke towards the end of the US session discussing inflation, employment and interest rates. According to Mr Powell, the Tariffs imposed by the US administration were higher than previous expectations.


According to the Fed, the trade policy is likely to trigger higher inflation, but it is unclear whether the higher inflation will be temporary or long-term. The Consumer and Producer Price Index over the next 3-6 months will be key for the Federal Reserve. The key statement that captured investors' attention was the chairman's remarks regarding the Federal Reserve's primary focus.


Powell said, ‘without price stability, we cannot achieve long periods of strong labor market conditions’. This comment was a clear indication that the Federal Reserve will concentrate on controlling inflation and will allow the employment sector to be temporarily hit. The hawkish tone from the Fed can be seen in the Fedwatch Tool.


The expectations of a pause have risen 14% over the past week, mainly due to the speech yesterday. However, the market still believes the Federal Reserve will cut in June 2025.


Crude Oil - Technical Analysis


The main concern for Crude Oil is the resistance level at $62.70, the domino effect of a Federal Reserve reluctant to cut rates and if the so-called ‘trade war’ escalates. As the price rose to the resistance level this morning, the asset quickly declined. Nonetheless, on a 2-hour chart, the asset remains above the trend line and above the neutral area of the RSI. However, the price is below the Volume-weighted average price. Therefore, we have conflicting signals.



Crude Oil


However, if the price continues to decline and establish itself below the 200-bar simple moving average in the 3-minute timeframe, the sell signals are likely to strengthen.


Key Takeaway Points:


1. Oil prices rose for a second day, driven by strong Chinese GDP, OPEC+ supply cuts, and renewed sanctions on Iran.
2. Positive economic data from China and the US boosted demand outlook, though analysts warn China's growth may slow due to upcoming tariffs.
3. The Fed maintained a hawkish stance, prioritizing inflation control, and raising uncertainty about rate cuts despite strong economic figures.
4. Trade talks with the US, UK, and Japan lifted market sentiment, but concerns remain over a potential escalation in the US-China trade dispute.


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Please note that times displayed based on local time zone and are from time of writing this report.


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Michalis Efthymiou
HFMarkets


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