Crude Oil, USDJPY Analysis: Critical Lows in Sight

Key Events:

OPEC Monthly Report
EIA Short-Term Energy Outlook
US CPI (m/m, y/y, Core CPI)
Crude Oil Inventories

OPEC and EIA Reports

OPEC Monthly Report: OPEC delivered its second consecutive downward revision for oil demand in 2024-2025, citing economic challenges in China and the global shift toward cleaner energy. This adjustment has led to the reversal of the previously planned October production hike, adding to the bearish sentiment in the oil market.

EIA Short-term Energy Outlook: Despite the bearish demand outlook, the EIA expects oil prices to rebound in the remaining part of 2024, driven by OPEC’s production cuts and potential inventory drops. Global consumption of liquid fuels has been adjusted lower for both 2024 and 2025, but the supply-demand balance is expected to support higher prices in the medium term.

US CPI and Rate Cut Expectations

With the Fed rate cut size under debate, the latest expectations by the CME Fed Watch tool for the upcoming rate cut magnitude is 65% for a 25bp cut and 35% for a 50bp cut, yet to be altered with the upcoming CPI data today.

Crude Oil Perspective: if a significant drop in US CPI was able to revise the 50bp rate cut magnitude expectation upwards, positive volatility can be seen on oil charts given stronger easing policies on the horizon for the economy.

USDJPY Perspective: With a 25bp cut largely priced into the dollar, a shift to a 50bp cut could see USDJPY break below the key 140 level. The upcoming BOJ policy for a rate hike or rate hold is set to lead the trend on the USDJPY pair following the effect of the Fed rate cut magnitude.

Technical Outlook

Crude Oil, USDJPY Analysis: USOIL – 3D Time Frame – Log Scale

Source: Tradingview

Following the bearish impact from the global oil demand outlook revisions, oil retested a strong support barrier at the 65 price-zone and is one more drop away towards the lower end of the channel and the 60 price-zone.

A potential support can be found at the 60 level from a psychological and round number point of view, yet my sharper projection is towards the 58 level as it aligns with the weekly 0.618 Fibonacci retracement between the lows of 2020 and highs of 2022.

From the upside, a positive impact from inventories, supply disruptions, or rate cut magnitudes can trace bullish corrections back towards the 71 and 76 levels respectively, aligning with the forecasts of the EIA.

Crude Oil, USDJPY Analysis: USDJPY – Daily Time Frame – Log Scale

Source: Tradingview

The USDJPY pair is currently trading at the lower end of the 140-price range, aligned with a strong support at the lows of December 2023. A break below 140 is expected to drive the pair to retest the July 2023 low at the 137 zone, and a close below that level is expected to drive a sharper drop towards the lower end of the 130-price range.

From the upside, positive dollar volatility can meet potential resistance at the 145 and 150 zones respectively.

--- Written by Razan Hilal, CMT, on X: @Rh_waves

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.