Oil Prices Supported as China Vows to Provide Stimulus

  • USOil
    (${instrument.percentChange}%)

USOIL Analysis

China's recovery is sputtering, according to a string of disappointing economic data over recent months. GDP grew by a frail 0.8% q/q in the second quarter, factory activity has slipped to contraction territory over the past three months, while consumer inflation was non-existent in June (0.0% y/y).

This has created expectations that authorities will ramp up support and the central bank has already slashed a series of rates, to provide liquidity. According to Xinhua, China's Politburo on Monday acknowledged the difficulties and pledged to take action to address them. Among other things, officials are looking to expand domestic demand, spur private investment and optimize property policies. [1]

Markets reacted positively to the news from the world's biggest importer of oil. They pushed USOil higher yesterday, helping it enter its fifth straight profitable week. This brings the 2023 highs in its crosshairs (83.55), but we are still cautious about sustained strength past that.

On the other hand, the move looks stretched and pressure back towards the EMA200 would not be surprising (at around 73.50). Daily closes below it would pause the upside momentum, but strong catalyst would be required for such outcome.

Oil prices have also been supported by optimism for an end to the Fed's hiking cycle, following the recent soft CPI inflation report. Policymakers are widely expected to raise rates on Wednesday, but the outlook is uncertain. Markets hope this will be last increase and see rate cuts next year, but they have been disappointed before. The outcome and the signaling around the next step can dictate the trajectory of oil prices.

Trade the News: View our Economic Calendar

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 22 Apr 2024 https://english.www.gov.cn/news/202307/24/content_WS64be6483c6d0868f4e8de104.html

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.