Energy Markets Experienced a Strong Start at the Beginning of 2025

Energy markets experienced a strong start at the beginning of 2025, with global oil prices jumping to their highest levels in five months, registering a notable increase of an average of 10%.

This significant rise was driven by growing concerns over the potential reduction of Russian crude oil supplies to the global market, especially after the United States imposed a new round of sanctions on Russia’s energy sector.

Additionally, rising expectations of improved global demand, particularly with the strong economic growth led by the United States alongside intensive measures to stimulate the Chinese economy, contributed to this surge.

Recent decisions by the OPEC+ alliance also played a crucial role in determining the price trajectory, as an extension of production restrictions was announced to better balance supply and demand in the market.

On the other hand, geopolitical tensions in some oil-producing regions have heightened concerns among traders about supply stability. This has led to increased insurance costs for shipments, which in turn has impacted prices.

Furthermore, the decline in U.S. inventories has boosted optimism about market recovery, with recent data showing a significant drop in commercial stocks.

In light of these developments, energy experts expect the positive momentum of oil prices to continue during the first quarter of the year, with expectations of further increases if current conditions persist. However, the market remains sensitive to any sudden changes that might affect supply or demand.

This report details the main reasons behind the surge in oil prices, with a comprehensive analysis of future trends that may determine the market’s path in the coming months.

Price Outlook

• Since the beginning of 2025, the price of U.S. crude oil has risen by more than 10%, reaching its highest level in five months at $79.19 per barrel during trading on January 13.
• Brent crude oil prices increased by 9.25%, reaching $81.64 per barrel on January 13, the highest level since August 2024.

US Sanctions on Russia

On January 10, 2025, the United States imposed a new package of sanctions on Russia’s energy sector, targeting major companies such as “Gazprom Neft” and “Surgutneftegaz,” in addition to over 180 oil tankers.

These measures aim to reduce Russia’s revenues from oil and gas exports, as part of ongoing efforts to pressure Moscow due to the ongoing war in Ukraine.

Details of the Sanctions

• Targeted Companies: The sanctions include “Gazprom Neft” and “Surgutneftegaz,” two of Russia’s largest oil producers.
• Oil Tankers: Approximately 183 ships were listed in the sanctions, hindering their ability to transport Russian oil to global markets.

Reactions

• The Kremlin: Kremlin spokesperson Dmitry Peskov expressed concern that these sanctions could destabilize global energy markets, emphasizing that such decisions do not contribute to market stability.
• International Analysts: Energy experts indicated that these sanctions could increase pressures on global oil markets, leading to higher prices and supply fluctuations.

Potential Impact

These sanctions are expected to affect Russia’s ability to export oil and gas, potentially reducing its revenues from the energy sector. They may also cause disruptions in global energy markets, given Russia’s prominent role as a major source of oil and gas.

Top Russian Crude Oil Importers

In 2024, India and China emerged as the largest importers of Russian crude oil, benefiting from competitive prices and discounts offered by Moscow amidst Western sanctions.

India

• Import Volume: India imported approximately 1.64 million barrels per day of Russian oil during the 2023-2024 fiscal year, representing a 57% increase compared to the previous year.
• Share of Total Imports: Russian oil accounted for about 35% of India’s total crude imports, compared to 22% in the previous year.
• Impact on Other Sources: This shift led to a decrease in the Middle East oil share in India’s imports to 46%, the lowest level ever.

China

• Import Volume: China’s imports of Russian oil increased by 17% since the beginning of 2024, reaching 37.79 million tons, equivalent to approximately 2.28 million barrels per day.
• Share of Total Imports: Russian oil constituted about 22% of China’s total crude imports, compared to 18% in the previous year, reflecting increased reliance on Russian oil due to competitive prices.
• Impact on Other Sources: This shift resulted in a reduction in the share of traditional suppliers, such as Saudi Arabia, whose exports to China declined by 8% compared to the previous year.
• It also affected oil imports from the United States and Africa, as China preferred Russian oil due to its lower cost and the favorable payment terms offered by Moscow.

Turkey

• Share of Imports: Turkey accounted for about 7% of Russia’s total crude oil exports from December 2022 to December 2024.

European Union

• Share of Imports: Despite the sanctions, the European Union imported about 6% of Russia’s total crude oil exports during the same period.

This shift in oil flows reflects a reshaping of the global energy map, as Russia seeks to strengthen its relations with Asian countries to overcome the impact of Western sanctions, while countries like India and China benefit from opportunities to obtain oil at discounted prices.

Opinions and Analyses on the Sanctions

Traders and analysts have stated that Russian oil exports will be severely affected by the new sanctions, pushing China and India to obtain more crude from the Middle East, Africa, and the Americas, which will drive up prices and shipping costs.

• Analyst at BVM “Tamas Farga”: There are real concerns in the market about supply disruptions from Russia. It seems that the worst-case scenario for Russian oil could become a reality.
• Farga added: However, it is unclear what will happen when “Donald Trump” takes office next week. Farga clarified that the sanctions include a cooling-off period until March 12, so there may not be significant disruptions until now.
• Goldman Sachs estimates: The ships targeted by the new sanctions transported 1.7 million barrels per day of oil in 2024, or 25% of Russia’s exports.
• Analysts wrote in a memo: Goldman Sachs: It is increasingly likely that its Brent range forecast between $70 and $85 per barrel will lean upwards.
• Analysts at RBC Capital Markets: Doubling the number of tankers sanctioned to transport Russian barrels could pose a significant logistical problem affecting crude oil flows.
• Head of Research at Onix Capital Group “Harry Chelengiorian”: The latest round of sanctions by the U.S. Office of Foreign Assets Control targeting Russian oil companies and a large number of tankers will have particularly severe consequences for India.
• Analysts at JP Morgan: Russia has some room to maneuver despite the new sanctions, but it will ultimately need to acquire unsanctioned tankers or offer crude at $60 per barrel or less to use Western insurance as stipulated in the Western price cap.
• Market Strategist at IG “Yap Jon Rong”: The main headlines surrounding Russian oil sanctions have been the dominant driver of oil prices recently, coupled with resilient U.S. economic data, witnessing tighter supply and demand dynamics some momentum.
• Rong added: With prices rising rapidly and sharply by about 10% since the beginning of the year, it is driving profit-taking activity with some risks emerging around upcoming U.S. inflation data releases.
• Analysts at ING in a memo: These sanctions have the potential to pull up to 700,000 barrels per day from the market’s supply, which would erase the surplus we expect this year.
• Analysts added: However, the actual decline in flows is likely to be less, as Russia and buyers find ways to circumvent these sanctions, and it is clear there will be more pressure on unsanctioned ships within the shadow fleet.
• Philip Jones Lux from Sparta Commodities: The new sanctions on Russian tankers are expected to affect crude supplies to China and India, although the main players in these countries are still assessing the legal situation and possible solutions.

Extension of OPEC+ Production Cuts

In December last year, the OPEC+ alliance announced an extension of oil production cuts by two million barrels per day for an additional year, until the end of 2026 instead of 2025, as part of its ongoing efforts to support the stability of global oil markets and enhance the balance between supply and demand.

Additionally, the eight countries contributing to the voluntary oil production cuts, amounting to 2.2 million barrels per day, decided to extend the timeline for lifting these cuts by an additional three months, so they end at the end of March 2025 instead of the previous deadline at the end of the current December.

OPEC+ members are currently implementing production cuts totaling 5.9 million barrels per day, equivalent to about 5.7% of global demand.

• Included Cuts: Two million barrels per day from OPEC+ members continue until the end of 2026 after the latest decision.
• Contributed by 9 Member Countries: (Saudi Arabia, UAE, Iraq, Kuwait, Kazakhstan, Algeria, Oman, Gabon, and Russia) reducing production by 1.7 million barrels per day, ending by the end of 2025.
• Additional Voluntary Cuts: Eight countries (Saudi Arabia, Russia, UAE, Kuwait, Algeria, Oman, Iraq, and Kazakhstan) agreed to implement additional voluntary production cuts amounting to 2.2 million barrels per day, to end by the end of March 2025.

Harsh Weather and Global Demand

Harsh weather in Europe and the United States has had a notable impact on oil markets recently, as unusual weather conditions have contributed to increased demand for fuel and higher prices. The main impacts are as follows:

1. Increased Demand for Heating Fuel: A sharp drop in temperatures in Europe and the United States has led to increased consumption of heating fuels, such as diesel and heating oil. This rise in demand for refined products has put pressure on refineries and increased crude oil prices, the primary source of these products.
2. Production and Transportation Disruptions: In the United States, snowstorms and ice have led to the closure of some oil fields, particularly in major production areas like Texas. Transportation networks and infrastructure have been disrupted, affecting producers’ ability to deliver oil to local and international markets.
3. Short-Term Price Boost: Cold weather has helped support oil prices, which have seen significant increases. For example, futures contracts for Brent crude and West Texas Intermediate (WTI) crude have risen with ongoing expectations of cold weather conditions.
4. Impact on Inventories: Increased consumption of heating fuel has led to faster-than-expected draws from strategic inventories, especially in the United States, raising concerns about market balance. Energy Information Administration (EIA) data showed a larger-than-expected decline in inventories, prompting investors to buy more futures contracts in anticipation of potential shortages.
5. Divergence in Global Demand: While demand for oil rose in Europe and the United States, demand in Asia remained relatively stable due to milder weather conditions. This divergence has helped mitigate the sharp rise in prices on a global level.
6. Seasonal Factors: Although cold weather boosts oil demand during winter, the market is anticipating a return to milder temperatures in the coming months, which may lead to a gradual decline in prices. Outlook: If harsh weather continues longer than expected, the market may experience further upward pressure on prices. However, the return to climatic stability will rebalance supply and demand, especially if producing countries respond by increasing production to compensate for any shortages.

Global Interest Rate Cuts

Major central banks in the United States, Europe, the United Kingdom, Canada, and New Zealand continue to cut interest rates and ease tight monetary policies, aiming to halt the decline in economic activity and preserve achieved gains. Low interest rates typically reduce borrowing costs, which can boost economic activity and increase demand for oil.

Economic Stimulus in China

Chinese authorities took additional new stimulus measures during the last quarter of 2024 to support the country’s weak economic activities, which will also reflect in improved oil demand levels in the world’s largest crude importer.

Chinese authorities announced that they will adopt a “somewhat accommodative” monetary policy, according to an official statement issued by a meeting of senior Communist Party officials, a term last used in 2010 when they sought to support recovery from the global financial crisis.

According to the ruling party’s political office, the country will adopt a “sufficiently accommodative” monetary policy in 2025, alongside a more proactive fiscal policy to stimulate economic growth.

Key Challenges Affecting Oil Prices in 2025

The crude oil market in 2025 faces numerous challenges that could significantly impact its prices, including the following:

• Continued Geopolitical Uncertainty:

  • The ongoing war in Ukraine and tensions in the Middle East cast shadows over oil markets, leading to significant price volatility.
  • The war in Ukraine continues with no clear solutions in sight, keeping oil prices in a state of uncertainty.
  • China escalates its claims of sovereignty over Taiwan, raising fears of a war between the two countries.
  • Many countries impose sanctions on some oil-producing nations.

• Global Economic Slowdown:

  • A slowdown in global economic growth could lead to a decrease in fuel demand.
  • Many major global economies face recession risks this year, casting a gloomy shadow on oil demand forecasts and price declines.

• Increased Production from Non-OPEC+ Countries:

  • Some non-OPEC+ countries, such as the United States and Canada, are seeking to increase their oil production. This could lead to an oversupply in the market and negatively pressure prices.

• Shift Towards Renewable Energy:

  • Many countries are aiming to reduce their reliance on fossil fuels and transition to renewable energy sources.
  • The shift to renewable energy in the long term could lead to a decrease in oil demand and exert downward pressure on prices.

• Climate Change Concerns:

  • Concerns about climate change are increasing pressure on governments and companies to reduce carbon emissions.
  • These pressures could lead to restrictions on oil usage and a decline in demand and prices.

Top Oil Price Forecasts for 2025

• Bank of America expects oil prices to stabilize around $80 per barrel this year.
• Goldman Sachs Group forecasts oil prices to rise to $80 per barrel this year.
• Citibank Group expects oil prices to stabilize around $75 per barrel this year.
• Morgan Stanley Group forecasted oil prices to reach $75 per barrel by the end of 2025.
• Deutsche Bank expects oil prices to reach $90 per barrel by the end of 2025, citing supply shortages as a key factor supporting prices.
• Barclays Bank also raised its oil price forecasts by five dollars above the target price of $90 per barrel by the end of this year.
• Geoffries Financial Consulting Institute indicated that Brent crude could end the year at $95 per barrel.
• The World Bank expects the average Brent crude price to be $93 per barrel in 2025, attributing this to ongoing geopolitical tensions and OPEC+ production slowdowns.
• The International Energy Agency expects the average Brent crude price to be $90 per barrel in 2025.
• Argus Media expects the average Brent crude price to be $95 per barrel in 2025.

Best Oil Trading Companies January 2025

 

• Pepperstone – Best overall crude oil trading broker for beginners. Multiple regulated licenses. Founded 2010. Minimum deposit: $0. 20% discount on deposit.
• FPMarkets  – Established 2005. Ideal for trading Crude Oil (WTI/Brent) with competitive spreads and fast execution. Minimum deposit: $100.
• Plus500 – Best licensed broker for investing in crude oil futures. Founded 2008. Multiple regulated licenses. Minimum deposit: $100.
• XM – Top crude oil WTI trading platform for educational materials and copy trading. Founded 2009. Multiple regulated licenses. Minimum deposit: $5. Periodic competitions and bonuses.

 

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Technical Analysis of Crude Oil Prices

When applying the Fibonacci correction rule to different timeframes of oil prices, we find that there are signals suggesting the price direction towards recovering the upward trend in the medium to long term. After several attempts to reach the 50% Fibonacci level for the entire rise measured from historical lows around $0.44 to the recorded peak at $126.34, the price bounced upward and broke through a significant resistance level, as shown in the following weekly chart:

 

 

The price is attempting to break through the resistance level formed at the previously broken 38.2% Fibonacci correction level, forming a significant resistance at $78.25. Breaking this level represents a key confirmation for the continuation of the upward wave and the direction to achieve positive targets starting at $84.40 and extending to areas of $90.00 and then $96.60 in the medium term.

The Stochastic indicator shows negative signals on the weekly timeframe, which may hinder the price’s task of achieving the required breakout at $78.25 and delay the confirmation of the breakout. This indicates that we need a weekly close above this level to confirm the continued rise.

On the other hand, on the daily timeframe, we find that the price began an upward correction from the recorded low in 2023 at $63.76. We observe that the price surpassed the 23.6% Fibonacci level to build more upward waves in the short term, targeting the visit to the 85.70% level as the next corrective target.

 

 

Continuing the application of Fibonacci corrections to different timeframes, the four-hour chart shows that the upward wave initiated by the price from the $67.05 area faced temporary downward retracements, followed by a resumption of the main upward trend. This contributed to pushing the price higher by forming ascending flag patterns, as shown in the chart below. Currently, the price is undergoing a downward correction that may lead it to test the $76.40 areas before resuming the upward wave again.

 

 

The recent trades are confined within a descending sub-channel forming a continuation flag pattern, meaning that breaking $78.90 will provide a good positive incentive supporting the continued upward trend in the upcoming period, aiming to achieve the aforementioned positive targets.

In summary, the expected overall trend for the upcoming period is upward, confirmed by breaking $78.25 and then $78.90, to receive positive incentives contributing to the surge towards levels of $84.40, then further to areas of $90.00 and $96.60.

Conversely, it is crucial to note that failing to confirm the breach of $78.90 and a downward rebound breaking the $74.60 level will force the price to turn downward, incurring new losses that could reach areas of $63.40 in the short term.

Fibonacci Levels

• 50% Fibonacci Level: A Fibonacci correction level reached from $0.44 to $126.34.
• 38.2% Fibonacci Level: A significant resistance level at $78.25.
• 23.6% Fibonacci Level: A corrective level on the daily timeframe at $85.70.

Technical Indicators

• Stochastic Indicator: Shows negative signals on the weekly timeframe, which may hinder the price’s task of achieving the required breakout.

Four-Hour Chart

The four-hour chart shows that the upward wave initiated by the price from the $67.05 area faced temporary downward retracements, followed by a resumption of the main upward trend. This contributed to pushing the price higher by forming ascending flag patterns, as shown in the chart below. Currently, the price is undergoing a downward correction that may lead it to test the $76.40 areas before resuming the upward wave again.

Trading Channels

• Descending Sub-Channel: Recent trades are confined within a descending sub-channel forming a continuation flag pattern.

Summary

In summary, the expected overall trend for the upcoming period is upward, confirmed by breaking $78.25 and then $78.90, to receive positive incentives contributing to the surge towards levels of $84.40, then further to areas of $90.00 and $96.60.

Conversely, it is crucial to note that failing to confirm the breach of $78.90 and a downward rebound breaking the $74.60 level will force the price to turn downward, incurring new losses that could reach areas of $63.40 in the short term.

Conclusion

In conclusion, the expected overall trend for the upcoming period is upward based on technical analysis, with necessary confirmations at $78.25 and $78.90 levels to support the continuation of the upward trend and achieve positive targets. However, attention must be paid to critical support levels at $74.60 and $63.40 in the event of negative reversals.

Closing

The overall expected trend for the upcoming period is upward based on technical analysis, with the necessity to monitor vital support and resistance levels to ensure the achievement of desired targets and avoid potential risks.

Energy Markets Experienced a Strong Start at the Beginning of 2025

Energy markets experienced a strong start at the beginning of 2025, with global oil prices jumping to their highest levels in five months, registering a notable increase of an average of 10%.

This significant rise was driven by growing concerns over the potential reduction of Russian crude oil supplies to the global market, especially after the United States imposed a new round of sanctions on Russia’s energy sector.

Additionally, rising expectations of improved global demand, particularly with the strong economic growth led by the United States alongside intensive measures to stimulate the Chinese economy, contributed to this surge.

Recent decisions by the OPEC+ alliance also played a crucial role in determining the price trajectory, as an extension of production restrictions was announced to better balance supply and demand in the market.

On the other hand, geopolitical tensions in some oil-producing regions have heightened concerns among traders about supply stability. This has led to increased insurance costs for shipments, which in turn has impacted prices.

Furthermore, the decline in U.S. inventories has boosted optimism about market recovery, with recent data showing a significant drop in commercial stocks.

In light of these developments, energy experts expect the positive momentum of oil prices to continue during the first quarter of the year, with expectations of further increases if current conditions persist. However, the market remains sensitive to any sudden changes that might affect supply or demand.

This report details the main reasons behind the surge in oil prices, with a comprehensive analysis of future trends that may determine the market’s path in the coming months.

Price Outlook

• Since the beginning of 2025, the price of U.S. crude oil has risen by more than 10%, reaching its highest level in five months at $79.19 per barrel during trading on January 13.
• Brent crude oil prices increased by 9.25%, reaching $81.64 per barrel on January 13, the highest level since August 2024.

US Sanctions on Russia

On January 10, 2025, the United States imposed a new package of sanctions on Russia’s energy sector, targeting major companies such as “Gazprom Neft” and “Surgutneftegaz,” in addition to over 180 oil tankers.

These measures aim to reduce Russia’s revenues from oil and gas exports, as part of ongoing efforts to pressure Moscow due to the ongoing war in Ukraine.

Details of the Sanctions

• Targeted Companies: The sanctions include “Gazprom Neft” and “Surgutneftegaz,” two of Russia’s largest oil producers.
• Oil Tankers: Approximately 183 ships were listed in the sanctions, hindering their ability to transport Russian oil to global markets.

Reactions

• The Kremlin: Kremlin spokesperson Dmitry Peskov expressed concern that these sanctions could destabilize global energy markets, emphasizing that such decisions do not contribute to market stability.
• International Analysts: Energy experts indicated that these sanctions could increase pressures on global oil markets, leading to higher prices and supply fluctuations.

Potential Impact

These sanctions are expected to affect Russia’s ability to export oil and gas, potentially reducing its revenues from the energy sector. They may also cause disruptions in global energy markets, given Russia’s prominent role as a major source of oil and gas.

Top Russian Crude Oil Importers

In 2024, India and China emerged as the largest importers of Russian crude oil, benefiting from competitive prices and discounts offered by Moscow amidst Western sanctions.

India

• Import Volume: India imported approximately 1.64 million barrels per day of Russian oil during the 2023-2024 fiscal year, representing a 57% increase compared to the previous year.
• Share of Total Imports: Russian oil accounted for about 35% of India’s total crude imports, compared to 22% in the previous year.
• Impact on Other Sources: This shift led to a decrease in the Middle East oil share in India’s imports to 46%, the lowest level ever.

China

• Import Volume: China’s imports of Russian oil increased by 17% since the beginning of 2024, reaching 37.79 million tons, equivalent to approximately 2.28 million barrels per day.
• Share of Total Imports: Russian oil constituted about 22% of China’s total crude imports, compared to 18% in the previous year, reflecting increased reliance on Russian oil due to competitive prices.
• Impact on Other Sources: This shift resulted in a reduction in the share of traditional suppliers, such as Saudi Arabia, whose exports to China declined by 8% compared to the previous year.
• It also affected oil imports from the United States and Africa, as China preferred Russian oil due to its lower cost and the favorable payment terms offered by Moscow.

Turkey

• Share of Imports: Turkey accounted for about 7% of Russia’s total crude oil exports from December 2022 to December 2024.

European Union

• Share of Imports: Despite the sanctions, the European Union imported about 6% of Russia’s total crude oil exports during the same period.

This shift in oil flows reflects a reshaping of the global energy map, as Russia seeks to strengthen its relations with Asian countries to overcome the impact of Western sanctions, while countries like India and China benefit from opportunities to obtain oil at discounted prices.

Opinions and Analyses on the Sanctions

Traders and analysts have stated that Russian oil exports will be severely affected by the new sanctions, pushing China and India to obtain more crude from the Middle East, Africa, and the Americas, which will drive up prices and shipping costs.

• Analyst at BVM “Tamas Farga”: There are real concerns in the market about supply disruptions from Russia. It seems that the worst-case scenario for Russian oil could become a reality.
• Farga added: However, it is unclear what will happen when “Donald Trump” takes office next week. Farga clarified that the sanctions include a cooling-off period until March 12, so there may not be significant disruptions until now.
• Goldman Sachs estimates: The ships targeted by the new sanctions transported 1.7 million barrels per day of oil in 2024, or 25% of Russia’s exports.
• Analysts wrote in a memo: Goldman Sachs: It is increasingly likely that its Brent range forecast between $70 and $85 per barrel will lean upwards.
• Analysts at RBC Capital Markets: Doubling the number of tankers sanctioned to transport Russian barrels could pose a significant logistical problem affecting crude oil flows.
• Head of Research at Onix Capital Group “Harry Chelengiorian”: The latest round of sanctions by the U.S. Office of Foreign Assets Control targeting Russian oil companies and a large number of tankers will have particularly severe consequences for India.
• Analysts at JP Morgan: Russia has some room to maneuver despite the new sanctions, but it will ultimately need to acquire unsanctioned tankers or offer crude at $60 per barrel or less to use Western insurance as stipulated in the Western price cap.
• Market Strategist at IG “Yap Jon Rong”: The main headlines surrounding Russian oil sanctions have been the dominant driver of oil prices recently, coupled with resilient U.S. economic data, witnessing tighter supply and demand dynamics some momentum.
• Rong added: With prices rising rapidly and sharply by about 10% since the beginning of the year, it is driving profit-taking activity with some risks emerging around upcoming U.S. inflation data releases.
• Analysts at ING in a memo: These sanctions have the potential to pull up to 700,000 barrels per day from the market’s supply, which would erase the surplus we expect this year.
• Analysts added: However, the actual decline in flows is likely to be less, as Russia and buyers find ways to circumvent these sanctions, and it is clear there will be more pressure on unsanctioned ships within the shadow fleet.
• Philip Jones Lux from Sparta Commodities: The new sanctions on Russian tankers are expected to affect crude supplies to China and India, although the main players in these countries are still assessing the legal situation and possible solutions.

Extension of OPEC+ Production Cuts

In December last year, the OPEC+ alliance announced an extension of oil production cuts by two million barrels per day for an additional year, until the end of 2026 instead of 2025, as part of its ongoing efforts to support the stability of global oil markets and enhance the balance between supply and demand.

Additionally, the eight countries contributing to the voluntary oil production cuts, amounting to 2.2 million barrels per day, decided to extend the timeline for lifting these cuts by an additional three months, so they end at the end of March 2025 instead of the previous deadline at the end of the current December.

OPEC+ members are currently implementing production cuts totaling 5.9 million barrels per day, equivalent to about 5.7% of global demand.

• Included Cuts: Two million barrels per day from OPEC+ members continue until the end of 2026 after the latest decision.
• Contributed by 9 Member Countries: (Saudi Arabia, UAE, Iraq, Kuwait, Kazakhstan, Algeria, Oman, Gabon, and Russia) reducing production by 1.7 million barrels per day, ending by the end of 2025.
• Additional Voluntary Cuts: Eight countries (Saudi Arabia, Russia, UAE, Kuwait, Algeria, Oman, Iraq, and Kazakhstan) agreed to implement additional voluntary production cuts amounting to 2.2 million barrels per day, to end by the end of March 2025.

Harsh Weather and Global Demand

Harsh weather in Europe and the United States has had a notable impact on oil markets recently, as unusual weather conditions have contributed to increased demand for fuel and higher prices. The main impacts are as follows:

1. Increased Demand for Heating Fuel: A sharp drop in temperatures in Europe and the United States has led to increased consumption of heating fuels, such as diesel and heating oil. This rise in demand for refined products has put pressure on refineries and increased crude oil prices, the primary source of these products.
2. Production and Transportation Disruptions: In the United States, snowstorms and ice have led to the closure of some oil fields, particularly in major production areas like Texas. Transportation networks and infrastructure have been disrupted, affecting producers’ ability to deliver oil to local and international markets.
3. Short-Term Price Boost: Cold weather has helped support oil prices, which have seen significant increases. For example, futures contracts for Brent crude and West Texas Intermediate (WTI) crude have risen with ongoing expectations of cold weather conditions.
4. Impact on Inventories: Increased consumption of heating fuel has led to faster-than-expected draws from strategic inventories, especially in the United States, raising concerns about market balance. Energy Information Administration (EIA) data showed a larger-than-expected decline in inventories, prompting investors to buy more futures contracts in anticipation of potential shortages.
5. Divergence in Global Demand: While demand for oil rose in Europe and the United States, demand in Asia remained relatively stable due to milder weather conditions. This divergence has helped mitigate the sharp rise in prices on a global level.
6. Seasonal Factors: Although cold weather boosts oil demand during winter, the market is anticipating a return to milder temperatures in the coming months, which may lead to a gradual decline in prices. Outlook: If harsh weather continues longer than expected, the market may experience further upward pressure on prices. However, the return to climatic stability will rebalance supply and demand, especially if producing countries respond by increasing production to compensate for any shortages.

Global Interest Rate Cuts

Major central banks in the United States, Europe, the United Kingdom, Canada, and New Zealand continue to cut interest rates and ease tight monetary policies, aiming to halt the decline in economic activity and preserve achieved gains. Low interest rates typically reduce borrowing costs, which can boost economic activity and increase demand for oil.

Economic Stimulus in China

Chinese authorities took additional new stimulus measures during the last quarter of 2024 to support the country’s weak economic activities, which will also reflect in improved oil demand levels in the world’s largest crude importer.

Chinese authorities announced that they will adopt a “somewhat accommodative” monetary policy, according to an official statement issued by a meeting of senior Communist Party officials, a term last used in 2010 when they sought to support recovery from the global financial crisis.

According to the ruling party’s political office, the country will adopt a “sufficiently accommodative” monetary policy in 2025, alongside a more proactive fiscal policy to stimulate economic growth.

Key Challenges Affecting Oil Prices in 2025

The crude oil market in 2025 faces numerous challenges that could significantly impact its prices, including the following:

• Continued Geopolitical Uncertainty:

  • The ongoing war in Ukraine and tensions in the Middle East cast shadows over oil markets, leading to significant price volatility.
  • The war in Ukraine continues with no clear solutions in sight, keeping oil prices in a state of uncertainty.
  • China escalates its claims of sovereignty over Taiwan, raising fears of a war between the two countries.
  • Many countries impose sanctions on some oil-producing nations.

• Global Economic Slowdown:

  • A slowdown in global economic growth could lead to a decrease in fuel demand.
  • Many major global economies face recession risks this year, casting a gloomy shadow on oil demand forecasts and price declines.

• Increased Production from Non-OPEC+ Countries:

  • Some non-OPEC+ countries, such as the United States and Canada, are seeking to increase their oil production. This could lead to an oversupply in the market and negatively pressure prices.

• Shift Towards Renewable Energy:

  • Many countries are aiming to reduce their reliance on fossil fuels and transition to renewable energy sources.
  • The shift to renewable energy in the long term could lead to a decrease in oil demand and exert downward pressure on prices.

• Climate Change Concerns:

  • Concerns about climate change are increasing pressure on governments and companies to reduce carbon emissions.
  • These pressures could lead to restrictions on oil usage and a decline in demand and prices.

Top Oil Price Forecasts for 2025

• Bank of America expects oil prices to stabilize around $80 per barrel this year.
• Goldman Sachs Group forecasts oil prices to rise to $80 per barrel this year.
• Citibank Group expects oil prices to stabilize around $75 per barrel this year.
• Morgan Stanley Group forecasted oil prices to reach $75 per barrel by the end of 2025.
• Deutsche Bank expects oil prices to reach $90 per barrel by the end of 2025, citing supply shortages as a key factor supporting prices.
• Barclays Bank also raised its oil price forecasts by five dollars above the target price of $90 per barrel by the end of this year.
• Geoffries Financial Consulting Institute indicated that Brent crude could end the year at $95 per barrel.
• The World Bank expects the average Brent crude price to be $93 per barrel in 2025, attributing this to ongoing geopolitical tensions and OPEC+ production slowdowns.
• The International Energy Agency expects the average Brent crude price to be $90 per barrel in 2025.
• Argus Media expects the average Brent crude price to be $95 per barrel in 2025.

Best Oil Trading Companies January 2025

 

• Pepperstone – Best overall crude oil trading broker for beginners. Multiple regulated licenses. Founded 2010. Minimum deposit: $0. 20% discount on deposit.
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• Plus500 – Best licensed broker for investing in crude oil futures. Founded 2008. Multiple regulated licenses. Minimum deposit: $100.
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Technical Analysis of Crude Oil Prices

When applying the Fibonacci correction rule to different timeframes of oil prices, we find that there are signals suggesting the price direction towards recovering the upward trend in the medium to long term. After several attempts to reach the 50% Fibonacci level for the entire rise measured from historical lows around $0.44 to the recorded peak at $126.34, the price bounced upward and broke through a significant resistance level, as shown in the following weekly chart:

 

 

The price is attempting to break through the resistance level formed at the previously broken 38.2% Fibonacci correction level, forming a significant resistance at $78.25. Breaking this level represents a key confirmation for the continuation of the upward wave and the direction to achieve positive targets starting at $84.40 and extending to areas of $90.00 and then $96.60 in the medium term.

The Stochastic indicator shows negative signals on the weekly timeframe, which may hinder the price’s task of achieving the required breakout at $78.25 and delay the confirmation of the breakout. This indicates that we need a weekly close above this level to confirm the continued rise.

On the other hand, on the daily timeframe, we find that the price began an upward correction from the recorded low in 2023 at $63.76. We observe that the price surpassed the 23.6% Fibonacci level to build more upward waves in the short term, targeting the visit to the 85.70% level as the next corrective target.

 

 

Continuing the application of Fibonacci corrections to different timeframes, the four-hour chart shows that the upward wave initiated by the price from the $67.05 area faced temporary downward retracements, followed by a resumption of the main upward trend. This contributed to pushing the price higher by forming ascending flag patterns, as shown in the chart below. Currently, the price is undergoing a downward correction that may lead it to test the $76.40 areas before resuming the upward wave again.

 

 

The recent trades are confined within a descending sub-channel forming a continuation flag pattern, meaning that breaking $78.90 will provide a good positive incentive supporting the continued upward trend in the upcoming period, aiming to achieve the aforementioned positive targets.

In summary, the expected overall trend for the upcoming period is upward, confirmed by breaking $78.25 and then $78.90, to receive positive incentives contributing to the surge towards levels of $84.40, then further to areas of $90.00 and $96.60.

Conversely, it is crucial to note that failing to confirm the breach of $78.90 and a downward rebound breaking the $74.60 level will force the price to turn downward, incurring new losses that could reach areas of $63.40 in the short term.

Fibonacci Levels

• 50% Fibonacci Level: A Fibonacci correction level reached from $0.44 to $126.34.
• 38.2% Fibonacci Level: A significant resistance level at $78.25.
• 23.6% Fibonacci Level: A corrective level on the daily timeframe at $85.70.

Technical Indicators

• Stochastic Indicator: Shows negative signals on the weekly timeframe, which may hinder the price’s task of achieving the required breakout.

Four-Hour Chart

The four-hour chart shows that the upward wave initiated by the price from the $67.05 area faced temporary downward retracements, followed by a resumption of the main upward trend. This contributed to pushing the price higher by forming ascending flag patterns, as shown in the chart below. Currently, the price is undergoing a downward correction that may lead it to test the $76.40 areas before resuming the upward wave again.

Trading Channels

• Descending Sub-Channel: Recent trades are confined within a descending sub-channel forming a continuation flag pattern.

Summary

In summary, the expected overall trend for the upcoming period is upward, confirmed by breaking $78.25 and then $78.90, to receive positive incentives contributing to the surge towards levels of $84.40, then further to areas of $90.00 and $96.60.

Conversely, it is crucial to note that failing to confirm the breach of $78.90 and a downward rebound breaking the $74.60 level will force the price to turn downward, incurring new losses that could reach areas of $63.40 in the short term.

Conclusion

In conclusion, the expected overall trend for the upcoming period is upward based on technical analysis, with necessary confirmations at $78.25 and $78.90 levels to support the continuation of the upward trend and achieve positive targets. However, attention must be paid to critical support levels at $74.60 and $63.40 in the event of negative reversals.

Closing

The overall expected trend for the upcoming period is upward based on technical analysis, with the necessity to monitor vital support and resistance levels to ensure the achievement of desired targets and avoid potential risks.

Japanese Yen Talking Points:

• Japanese Yen strength showed against the U.S. Dollar in the aftermath of this morning’s U.S. CPI report.
• While questions remain around the Fed’s ability to cut rates this year, both Europe and the U.K. could drive bearish fundamental backdrops, making the prospect of carry unwind in GBP/JPY and EUR/JPY as more attractive concepts.
• I look into these pairs each week in the Tuesday webinar, and you’re welcome to join: Click here for registration information.

USD/JPY Support Break

 

The U.S. Dollar showed a move of weakness around the U.S. CPI print this morning, and while DXY has bounced back and the EUR/USD sell-off has caught another shot-in-the-arm, USD/JPY is holding relatively close to the morning’s lows.

There’s also the breach of a support zone that had showed as prior resistance, taken from the 76.4 and 78.6% Fibonacci retracements of the July-September sell-off. This zone had previously helped to hold resistance in November, but more recently it had helped to hold support over the past two weeks, until this morning’s breach down to a lower-low.

 

USD/JPY Daily Price Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

USD/JPY Four-Hour

 

On a shorter-term basis we can see where this morning’s sell-off brought upon a fresh 2025 low in the pair; but the bounce from that has, so far, held resistance at the bottom of the support zone noted above.

For overhead resistance, there’s a prior swing-low at 156.91 and the top of the Fibonacci zone at 157.17. And for next support below the 156.00 handle, it’s the 155.00 psychological level that looms large.

 

USD/JPY Four-Hour Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

 

GBP/JPY

 

It’s been a slippery start to the year for the British Pound and I had looked at GBP/JPY in the weekly forecast, highlighting a bearish backdrop as prices had started to push below a long-term zone. Monday saw another spill in GBP/JPY and the pair made a fast push down to the 190.00 handle before catching a sizable bounce. Resistance held overnight at 193.00 and sellers have went back for another run, but chasing this at this point could be a challenge.

From the weekly chart below, we can see a longer-term trend that’s come more and more into question, as shown by lower-highs over the past six months. But if the pair gives up the 190.00 level, the door could soon open to breakdown scenarios.

 

GBP/JPY Weekly Chart

Chart prepared by James Stanley, GBP/JPY on Tradingview

 

GBP/JPY Four-Hour

 

Given how quickly the pair has moved off of that 193.00 level, chasing could be challenging. But, there’s also context for a lower-high around the 192.40 level; and if that doesn’t come into the picture, the 190.81 Fibonacci level could potential be used to work with breakdown scenarios into the 190.00 psychological level.

 

GBP/JPY Four-Hour Price Chart

Chart prepared by James Stanley, GBP/JPY on Tradingview

 

EUR/JPY

 

EUR/JPY is currently within a symmetrical triangle formation and earlier this week, it was around the 160.00 level that had held the lows after bears attempted to continue the sell-off that started after resistance at the 165.00 level around the end of 2024.

Similar to GBP/JPY above, that can be a tough move to chase. But the weekly chart shows the bigger-picture where, if we do see a notable sell-off and a breach of recent congestion, a longer-term move could come into play.

 

EUR/JPY Weekly Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

 

EUR/JPY Four-Hour

 

From the four-hour chart of EUR/JPY, we can see another Fibonacci level coming into play at 160.90 to help hold the lows so far today. This is quite near the earlier week swing low and this could, again, be a challenging place to chase price-lower. But – it does highlight lower-high resistance potential at 161.44 or 162.04, both of which could keep the door open for a 160.00 test.

Or – if no pullback shows, a breach of 160.00 opens the door to bigger picture breakdown potential, with the next notable level-lower the Fibonacci level at 158.66.

 

EUR/JPY Four-Hour Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

 

— written by James Stanley, Senior Strategist

 

Japanese Yen Talking Points:

• Japanese Yen strength showed against the U.S. Dollar in the aftermath of this morning’s U.S. CPI report.
• While questions remain around the Fed’s ability to cut rates this year, both Europe and the U.K. could drive bearish fundamental backdrops, making the prospect of carry unwind in GBP/JPY and EUR/JPY as more attractive concepts.
• I look into these pairs each week in the Tuesday webinar, and you’re welcome to join: Click here for registration information.

USD/JPY Support Break

 

The U.S. Dollar showed a move of weakness around the U.S. CPI print this morning, and while DXY has bounced back and the EUR/USD sell-off has caught another shot-in-the-arm, USD/JPY is holding relatively close to the morning’s lows.

There’s also the breach of a support zone that had showed as prior resistance, taken from the 76.4 and 78.6% Fibonacci retracements of the July-September sell-off. This zone had previously helped to hold resistance in November, but more recently it had helped to hold support over the past two weeks, until this morning’s breach down to a lower-low.

 

USD/JPY Daily Price Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

 

USDJPY AD

 

USD/JPY Four-Hour

 

On a shorter-term basis we can see where this morning’s sell-off brought upon a fresh 2025 low in the pair; but the bounce from that has, so far, held resistance at the bottom of the support zone noted above.

For overhead resistance, there’s a prior swing-low at 156.91 and the top of the Fibonacci zone at 157.17. And for next support below the 156.00 handle, it’s the 155.00 psychological level that looms large.

 

USD/JPY Four-Hour Chart

Chart prepared by James Stanley, USD/JPY on Tradingview

 

GBP/JPY

 

It’s been a slippery start to the year for the British Pound and I had looked at GBP/JPY in the weekly forecast, highlighting a bearish backdrop as prices had started to push below a long-term zone. Monday saw another spill in GBP/JPY and the pair made a fast push down to the 190.00 handle before catching a sizable bounce. Resistance held overnight at 193.00 and sellers have went back for another run, but chasing this at this point could be a challenge.

From the weekly chart below, we can see a longer-term trend that’s come more and more into question, as shown by lower-highs over the past six months. But if the pair gives up the 190.00 level, the door could soon open to breakdown scenarios.

 

GBP/JPY Weekly Chart

Chart prepared by James Stanley, GBP/JPY on Tradingview

 

GBP/JPY Four-Hour

 

Given how quickly the pair has moved off of that 193.00 level, chasing could be challenging. But, there’s also context for a lower-high around the 192.40 level; and if that doesn’t come into the picture, the 190.81 Fibonacci level could potential be used to work with breakdown scenarios into the 190.00 psychological level.

 

GBP/JPY Four-Hour Price Chart

Chart prepared by James Stanley, GBP/JPY on Tradingview

 

EUR/JPY

 

EUR/JPY is currently within a symmetrical triangle formation and earlier this week, it was around the 160.00 level that had held the lows after bears attempted to continue the sell-off that started after resistance at the 165.00 level around the end of 2024.

Similar to GBP/JPY above, that can be a tough move to chase. But the weekly chart shows the bigger-picture where, if we do see a notable sell-off and a breach of recent congestion, a longer-term move could come into play.

 

EUR/JPY Weekly Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

 

EUR/JPY Four-Hour

 

From the four-hour chart of EUR/JPY, we can see another Fibonacci level coming into play at 160.90 to help hold the lows so far today. This is quite near the earlier week swing low and this could, again, be a challenging place to chase price-lower. But – it does highlight lower-high resistance potential at 161.44 or 162.04, both of which could keep the door open for a 160.00 test.

Or – if no pullback shows, a breach of 160.00 opens the door to bigger picture breakdown potential, with the next notable level-lower the Fibonacci level at 158.66.

 

EUR/JPY Four-Hour Chart

Chart prepared by James Stanley, EUR/JPY on Tradingview

 

— written by James Stanley, Senior Strategist

British Pound Technical Forecast: GBP/USD Weekly Trade Levels

• British Pound poised to mark fourth-monthly decline- bulls responding to key technical support
• GBP/USD risk for near-term price inflection- Retail sales, U.S. Presidential Inauguration on tap
• Resistance 1.2367/97, 1.2494 (key), 1.26- Support 1.2084-1.2114 (key), 1.1841/89, 1.1632

The British Pound has plunged more than 3.3% since the start of month / year with GBP/USD responding to key support this week. The four-month decline may be vulnerable while above his key inflection zone and the immediate focus on this recovery in the days ahead. Battle lines drawn on the GBP/USD weekly technical chart.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Sterling setup and more. Join live on Monday’s at 8:30am EST.

British Pound Price Chart – GBP/USD Weekly

 

Chart Prepared by Michael Boutros, Sr. Technical Strategist; GBP/USD on TradingView

Technical Outlook: In last month’s British Pound Weekly Forecast we noted that the GBP/USD was trading into resistance at a major pivot zone with, “the immediate focus is on a breakout of the monthly range with the broader outlook still weighted to the downside while below 1.2850.” Support broke two-weeks later with Sterling plunging more than 5.2% off the December highs.

The decline responded to key support on Monday at the 2023 yearly open / 2023 low-week close (LWC) at 1.2084-1.2114. Looking for a reaction off this mark with the immediate short-bias vulnerable while above.

Initial weekly resistance is eyed at 1.2367/97– a region defined by the April low-close, the 2023 January high-week close (HWC) and the May low-week close (LWC). Note that basic channel resistance converges on this threshold over the next few weeks and further highlight the technical significance of this threshold. Ultimately, a breach / close above the 2024 LWC at 1.2494 would be needed to suggest a more significant low was registered this week / a larger trend reversal is underway (bearish invalidation).

A break / weekly close below this key pivot zone would threaten another bout of accelerated losses with subsequent support objectives seen at the January 2024 swing low / 50% retracement of the 2022 advance at 1.1841/89 and the 2020 LWC at 1.1632– both areas of interest for possible exhaustion / price inflection IF reached.

Bottom line: A four-month sell-off takes GBP/USD into pivotal support – risk for possible inflection off this zone. From a trading standpoint, a good region to reduce short-positioning / lower protective stops- rallies should be limited to 1.2397 IF price is heading lower on this stretch with a close below 1.2084 needed to mark downtrend resumption.

Keep in mind we get the release of US & UK retail sales data the close of the week with key UK employment data and the inauguration of President Trump on tap early next week. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest British Pound Short-term Outlook for a closer look at the near-term GBP/USD technical trade levels.

GBP/USD Economic Data Releases

 

Economic Calendar – latest economic developments and upcoming event risk.

Active Weekly Technical Charts

— Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex

GBP/USD rises after UK inflation cools

• UK CPI falls to 2.5% YoY from 2.6%
• Service sector inflation falls to 4.4% from 5%
• Rate cut expectations rise 12 basis points
• GBP/USD inches higher

GBP/USD is edging higher after cooler-than-expected inflation helped pull gilt yields lower

UK CPI unexpectedly fell to 2.5% YoY in December, down from 2.6% and below forecasts of 2.7%. Meanwhile, service sector inflation, which the Bank of England is watching closely, cooled by more than expected to 4.4%, well below the 4.8% predicted and down from 5% in November. Sticky service sector inflation has hindered the BoE from cutting interest rates further.

 Following the data the market has ramped up BoE rate cut expectations, adding 12 basis points to bets for 2025 cuts, which are now seen at 49 basis points across the year. This is still short of the central bank’s forecast for 4 rate cuts this year.

Usually, with rising rate cut expectations, the pound would fall. However, today’s data has also pulled guilty yields sharply lower, dropping by around 9 basis points on the 2-year bond, the most sensitive to Bank of England policy, which is helping to support the pound.

The data is a step in the right direction but it doesn’t mean that the UK is out of the woods just yet, particularly given that a recent survey by the British Retail Consortium shows that 2/3 of retailers will raise prices in response to higher employer Social Security costs from the budget which bodes poorly for progress in disinflation outlook. Meanwhile, the same survey of chief financial officers and finance directors at 52 major retailers found that around half plan to reduce staff hours and headcount.

There are also growing worries about UK growth, which has been on a downward trajectory since labour came to power in July. This, combined with the prospect of sticky inflation, means a stagflationary outlook is a very real problem. UK GDP data is due tomorrow and will provide further clues about the health of the UK economy.

Attention also turns to the US CPI, which is due later today and is expected to rise to 2.9% from 2.7%. What inflation could further dampen rate cut expectations, boosting the USD and pulling GBP USD lower?

GBP/USD forecast – technical analysis

GBP/USD trended lower from 1.34 to a low of 1.21 at the start of the week. The price recovered from 1.21 and trades back above the 1.22 level, bringing the RSI out of oversold territory. The long-term downtrend remains intact, but the hammer candlestick and the long lower wicks on candles this week suggest that the bottom could be in, and a bullish reversal could be in the cards.

Buyers will look to extend gains above 1.23, the April low, before focusing on 1.25, the December low into focus.

Sellers will need to take out the 1.21 low to extend losses to 1.2050, the 2023 low, and 1.20, the psychological level.

 

 

USD/JPY falls ahead of US CPI

• Yen rises after hawkish BoJ comments
• US CPI is expected to rise to 2.9% from 2.7%
• USD/JPY tests 157.1 support

USD/JPY is falling amid a stronger yen following hawkish BoJ’s Ueda remarks. However, those gains could be short-lived ahead of US inflation data.

Governor Ueda reiterated the central bank’s commitment to raising borrowing costs if the economy continues to improve. His comments followed days of the OJ deputy governor him me know on Tuesday. The end raise as markets priced in the possibility of a rate hike at next weeks meeting.

Comments from Finance Minister Kato, who revived concerns about potential government intervention in the FX markets, also supported the yen.

Attention is now turning to US inflation data, which is expected to show that CPI increased 2.9% from 2.7% in November, marking its fifth straight monthly increase and moving further from the Fed’s 2% target.

Worries about hot inflation are already rampant in the market, with treasury yields elevated. I mean, the resilient U.S. economy and ahead of Trump’s administration. Trump is expected to implement inflationary policies.

Hotter-than-expected inflation could see the market further resist Fed rate cut bets. Currently, the market sees just one rate shot right at the end of this year. This could see USD/JPY recover higher above 158.

USD/JPY forecast – technical analysis

After a strong run-up from the 148.65 low, USD/JPY has been consolidating just below 158. The price is testing support at the 78.6% fib retracement at 157.10, as the MACD shows a bearish cross-over.

Should sellers meaningfully break below 157.10 and 156.75 the November high, a deeper selloff towards 155 round number and 152.40 the 61.8% fib level could be on the cards.

Should the 157.10-156.75 support zone hold, buyers will look to extend gains above 168.80, the 2025 high, towards 160 and 162, the 2024 high.

 

GBP/USD rises after UK inflation cools

• UK CPI falls to 2.5% YoY from 2.6%
• Service sector inflation falls to 4.4% from 5%
• Rate cut expectations rise 12 basis points
• GBP/USD inches higher

GBP/USD is edging higher after cooler-than-expected inflation helped pull gilt yields lower

UK CPI unexpectedly fell to 2.5% YoY in December, down from 2.6% and below forecasts of 2.7%. Meanwhile, service sector inflation, which the Bank of England is watching closely, cooled by more than expected to 4.4%, well below the 4.8% predicted and down from 5% in November. Sticky service sector inflation has hindered the BoE from cutting interest rates further.

 Following the data the market has ramped up BoE rate cut expectations, adding 12 basis points to bets for 2025 cuts, which are now seen at 49 basis points across the year. This is still short of the central bank’s forecast for 4 rate cuts this year.

Usually, with rising rate cut expectations, the pound would fall. However, today’s data has also pulled guilty yields sharply lower, dropping by around 9 basis points on the 2-year bond, the most sensitive to Bank of England policy, which is helping to support the pound.

The data is a step in the right direction but it doesn’t mean that the UK is out of the woods just yet, particularly given that a recent survey by the British Retail Consortium shows that 2/3 of retailers will raise prices in response to higher employer Social Security costs from the budget which bodes poorly for progress in disinflation outlook. Meanwhile, the same survey of chief financial officers and finance directors at 52 major retailers found that around half plan to reduce staff hours and headcount.

There are also growing worries about UK growth, which has been on a downward trajectory since labour came to power in July. This, combined with the prospect of sticky inflation, means a stagflationary outlook is a very real problem. UK GDP data is due tomorrow and will provide further clues about the health of the UK economy.

Attention also turns to the US CPI, which is due later today and is expected to rise to 2.9% from 2.7%. What inflation could further dampen rate cut expectations, boosting the USD and pulling GBP USD lower?

GBP/USD forecast – technical analysis

GBP/USD trended lower from 1.34 to a low of 1.21 at the start of the week. The price recovered from 1.21 and trades back above the 1.22 level, bringing the RSI out of oversold territory. The long-term downtrend remains intact, but the hammer candlestick and the long lower wicks on candles this week suggest that the bottom could be in, and a bullish reversal could be in the cards.

Buyers will look to extend gains above 1.23, the April low, before focusing on 1.25, the December low into focus.

Sellers will need to take out the 1.21 low to extend losses to 1.2050, the 2023 low, and 1.20, the psychological level.

 

 

USD/JPY falls ahead of US CPI

• Yen rises after hawkish BoJ comments
• US CPI is expected to rise to 2.9% from 2.7%
• USD/JPY tests 157.1 support

USD/JPY is falling amid a stronger yen following hawkish BoJ’s Ueda remarks. However, those gains could be short-lived ahead of US inflation data.

Governor Ueda reiterated the central bank’s commitment to raising borrowing costs if the economy continues to improve. His comments followed days of the OJ deputy governor him me know on Tuesday. The end raise as markets priced in the possibility of a rate hike at next weeks meeting.

Comments from Finance Minister Kato, who revived concerns about potential government intervention in the FX markets, also supported the yen.

Attention is now turning to US inflation data, which is expected to show that CPI increased 2.9% from 2.7% in November, marking its fifth straight monthly increase and moving further from the Fed’s 2% target.

Worries about hot inflation are already rampant in the market, with treasury yields elevated. I mean, the resilient U.S. economy and ahead of Trump’s administration. Trump is expected to implement inflationary policies.

Hotter-than-expected inflation could see the market further resist Fed rate cut bets. Currently, the market sees just one rate shot right at the end of this year. This could see USD/JPY recover higher above 158.

USD/JPY forecast – technical analysis

After a strong run-up from the 148.65 low, USD/JPY has been consolidating just below 158. The price is testing support at the 78.6% fib retracement at 157.10, as the MACD shows a bearish cross-over.

Should sellers meaningfully break below 157.10 and 156.75 the November high, a deeper selloff towards 155 round number and 152.40 the 61.8% fib level could be on the cards.

Should the 157.10-156.75 support zone hold, buyers will look to extend gains above 168.80, the 2025 high, towards 160 and 162, the 2024 high.

 

• UK consumer inflation increased by a smaller-than-expected 2.5% annually.

• Market participants increased the likelihood of a Feb BoE rate cut from 60% to 80%.

• Economists expect US consumer inflation to increase by 2.6% annually.

The GBP/USD forecast shows a bright day for the pound despite downbeat UK inflation figures. A decline in UK yields has relieved the currency after its recent plunge. On the other hand, the dollar halted its rally after soft wholesale inflation data. Moreover, traders eagerly await the CPI report for more clues on future Fed moves. 

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Data on Wednesday revealed that UK consumer inflation increased by 2.5% annually. This was a smaller number than the forecast of 2.6%. As a result, market participants increased the likelihood of a Feb BoE rate cut from 60% to 80%.

The pound dropped in response, but only for a while. The increase in rate-cut bets also led to a drop in UK yields, which have rallied in recent weeks. The rally had caused uncertainty about UK finances and the economy, hurting the pound. Therefore, Wednesday’s pullback came as a welcome surprise, boosting sterling.

The pound also got support from a weak dollar. The greenback eased on Tuesday after cooler-than-expected wholesale inflation data. However, all focus is on the upcoming US consumer inflation report. Economists expect inflation to increase by 2.6% annually, holding from the previous month. A surprising number will cause volatility by shifting the outlook for Fed rate cuts.

GBP/USD key events today

• US core CPI m/m
• US CPI m/m
• US CPI y/y

GBP/USD technical forecast: Pullback pauses as 30-SMA poses a challenge

On the technical side, the GBP/USD price has rebounded to retest the 30-SMA resistance after making a new low at the 1.2102 support level. At the same time, the price has revisited the 1.2250 resistance level. However, the downtrend remains intact as the price trades below the 30-SMA with the RSI in bearish territory. 

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The rebound has been a corrective move, with both bears and bulls showing some strength. However, the price must make an impulsive leg for the price to start trending. Therefore, if bears are ready to resume the downtrend, the price will make a new swing low below the 1.2102 support level. 

On the other hand, an impulsive leg to break above the 30-SMA would signal a shift in sentiment that would likely lead to a bullish reversal.

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GBP/USD rises after UK inflation cools

• UK CPI falls to 2.5% YoY from 2.6%
• Service sector inflation falls to 4.4% from 5%
• Rate cut expectations rise 12 basis points
• GBP/USD inches higher

GBP/USD is edging higher after cooler-than-expected inflation helped pull gilt yields lower

UK CPI unexpectedly fell to 2.5% YoY in December, down from 2.6% and below forecasts of 2.7%. Meanwhile, service sector inflation, which the Bank of England is watching closely, cooled by more than expected to 4.4%, well below the 4.8% predicted and down from 5% in November. Sticky service sector inflation has hindered the BoE from cutting interest rates further.

 Following the data the market has ramped up BoE rate cut expectations, adding 12 basis points to bets for 2025 cuts, which are now seen at 49 basis points across the year. This is still short of the central bank’s forecast for 4 rate cuts this year.

Usually, with rising rate cut expectations, the pound would fall. However, today’s data has also pulled guilty yields sharply lower, dropping by around 9 basis points on the 2-year bond, the most sensitive to Bank of England policy, which is helping to support the pound.

The data is a step in the right direction but it doesn’t mean that the UK is out of the woods just yet, particularly given that a recent survey by the British Retail Consortium shows that 2/3 of retailers will raise prices in response to higher employer Social Security costs from the budget which bodes poorly for progress in disinflation outlook. Meanwhile, the same survey of chief financial officers and finance directors at 52 major retailers found that around half plan to reduce staff hours and headcount.

There are also growing worries about UK growth, which has been on a downward trajectory since labour came to power in July. This, combined with the prospect of sticky inflation, means a stagflationary outlook is a very real problem. UK GDP data is due tomorrow and will provide further clues about the health of the UK economy.

Attention also turns to the US CPI, which is due later today and is expected to rise to 2.9% from 2.7%. What inflation could further dampen rate cut expectations, boosting the USD and pulling GBP USD lower?

GBP/USD forecast – technical analysis

GBP/USD trended lower from 1.34 to a low of 1.21 at the start of the week. The price recovered from 1.21 and trades back above the 1.22 level, bringing the RSI out of oversold territory. The long-term downtrend remains intact, but the hammer candlestick and the long lower wicks on candles this week suggest that the bottom could be in, and a bullish reversal could be in the cards.

Buyers will look to extend gains above 1.23, the April low, before focusing on 1.25, the December low into focus.

Sellers will need to take out the 1.21 low to extend losses to 1.2050, the 2023 low, and 1.20, the psychological level.

 

 

USD/JPY falls ahead of US CPI

• Yen rises after hawkish BoJ comments
• US CPI is expected to rise to 2.9% from 2.7%
• USD/JPY tests 157.1 support

USD/JPY is falling amid a stronger yen following hawkish BoJ’s Ueda remarks. However, those gains could be short-lived ahead of US inflation data.

Governor Ueda reiterated the central bank’s commitment to raising borrowing costs if the economy continues to improve. His comments followed days of the OJ deputy governor him me know on Tuesday. The end raise as markets priced in the possibility of a rate hike at next weeks meeting.

Comments from Finance Minister Kato, who revived concerns about potential government intervention in the FX markets, also supported the yen.

Attention is now turning to US inflation data, which is expected to show that CPI increased 2.9% from 2.7% in November, marking its fifth straight monthly increase and moving further from the Fed’s 2% target.

Worries about hot inflation are already rampant in the market, with treasury yields elevated. I mean, the resilient U.S. economy and ahead of Trump’s administration. Trump is expected to implement inflationary policies.

Hotter-than-expected inflation could see the market further resist Fed rate cut bets. Currently, the market sees just one rate shot right at the end of this year. This could see USD/JPY recover higher above 158.

USD/JPY forecast – technical analysis

After a strong run-up from the 148.65 low, USD/JPY has been consolidating just below 158. The price is testing support at the 78.6% fib retracement at 157.10, as the MACD shows a bearish cross-over.

Should sellers meaningfully break below 157.10 and 156.75 the November high, a deeper selloff towards 155 round number and 152.40 the 61.8% fib level could be on the cards.

Should the 157.10-156.75 support zone hold, buyers will look to extend gains above 168.80, the 2025 high, towards 160 and 162, the 2024 high.

 

Created on January 15, 2025

• For the second consecutive trading day, the EUR/USD currency pair has attempted to halt its recent sharp decline, which extended to a low of 1.0177, the lowest level for the currency pair in over two years.
• Stability is cautious until the announcement of US inflation figures, which will strongly affect expectations for the future policies of the US Federal Reserve under Trump.

Central Bank Policies Impact Exchange Rates

According to recent trades, investors in the $13 trillion high-grade corporate bond market are focusing on an unprecedented divergence between expected US and European monetary policy paths. US Treasury yields are likely to outperform their European counterparts as the European Central Bank is still expected to deliver several interest rates cuts this year, while the Federal Reserve is seen keeping US interest rates higher for longer, according to some fund managers.

This divergence has not been seen early in the year for as long as Bloomberg has tracked interest rate expectations for the US Federal Reserve, the European Central Bank, and the Bank of England. The only notable divergence at the beginning of the year was recorded in 2023, when traders were pricing in rising interest rates – a backdrop typically associated with falling bond prices – rather than cuts.

Also, the divergence between the policies of the European Central Bank and the Federal Reserve weighs heavily on the euro-dollar exchange rate.

Interest Rate Expectations for 2025

Investors and markets expect the European Central Bank to cut interest rates by 25 basis points more than three times by the end of 2025, even after they lowered their expectations in recent days. In contrast, they expect only one cut from the US Federal Reserve after US jobs data showed that the US labor market remains strong. According to officials, the European Central Bank should continue to cut interest rates, regardless of what the US Federal Reserve does.

In general, market expectations for central bank cuts can certainly change quickly with the release of new economic data. At the beginning of December 2024, traders were pricing in more than three cuts by the Federal Reserve in 2025.

Trading Tips:

Dear follower of the TradersUp website, the euro-dollar is still on its way to parity. So, be careful, do not take risks, and always monitor the factors affecting the performance of the currency pair.

EUR/USD Technical Analysis Today:

Dear reader, there is no change in my technical outlook for the EUR/USD pair. The overall trend remains bearish, and the recent rebound is temporary. Investors are awaiting important US economic events. Currently, the closest support levels for the euro dollar are 1.0220, 1.0170, and 1.0080. technically, these levels are sufficient to push technical indicators towards oversold levels. The Relative Strength Index and the MACD are in the bearish zone. Furthermore, we still recommend selling the euro dollar at every opportunity.

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Platinum price lost the positive momentum yesterday to force it to form temporary negative rebound and notice its stability near the additional support 935.00$, to settle above it and reinforce the chances of renewing the bullish attempts again.

 

Also, 920.00 level continues to form major support against the current trades, allowing us to wait to gather the positive momentum again to manage to surpass the MA55 at 955.00$ followed by extending trades towards the next main target at 983.00$.

 

The expected trading range for today is between 930.00$ and 955.00$

 

Trend forecast: Bullish