OPEC Decision Awaited, US NFPs Enter the Center Stage

Risk Sentiment Improves, Oil Slides as OPEC Decision Looms

The dollar traded lower against most of the other G10 currencies yesterday. It lost the most ground against GBP, CHF and NZD, while it gained only against JPY. The greenback traded virtually unchanged against AUD, CAD, SEK.

Brent Oil — Technical Outlook

Brent oil traded lower yesterday, breaking below the support (now turned into resistance) territory of 60.90. However, the slide was stopped slightly above the 58.00 barrier, and then the price rebounded again. The black liquid continues to trade below the short-term downtrend line taken from the peak of the 9thof October, which, at least from a technical standpoint, keeps the near-term outlook negative. However, as we noted yesterday, bearing in mind that the upcoming directional move is likely to depend on the OPEC+ outcome, we prefer to adopt a neutral stance for now.

US Employment Report Enters the Limelight

Apart from headlines surrounding the OPEC gathering, today, market participants are likely to focus on the US employment data for November as well. Expectations are for NFPs to have risen 200k, which is less than October’s 250k, but still a decent number consistent with further tightening of the labor market. Yesterday, the ADP figure came in below expectations, which may have raised some speculation that the NFP may miss its forecast as well. That said, we repeat once again that the correlation between the two time-series at the time of the release has been very low in recent years. Thus, we would not pay much emphasis on the ADP print.

USD/CAD — Technical Outlook

USD/CAD skyrocketed on Wednesday following the dovish switch by the BoC, breaking two resistance (now turned into support) barriers in a row. The pair continued drifting north yesterday as well but hit resistance near 1.3440 and pulled back. On Tuesday, the pair emerged back above the uptrend line drawn from the low of the 1stof October, while Wednesday’s rally confirmed a forthcoming higher high on both the 4-hour and daily charts. In our view, these moves have changed the near-term picture back to a positive one.

As for the Rest of Today’s Events

Besides the US jobs data, we get employment numbers from Canada as well. Expectations are for the unemployment rate to have held steady at 5.8%, while the forecast of the net employment change has changed and now suggests that that the economy has gained slightly less jobs than in October (10.3k vs 11.2k). Following the dovish switch by the BoC, even if we see a somewhat better-than-expected report, we doubt that CAD-traders will be encouraged to place their January-hike bets back on the table. We expect them to stay focused on headlines surrounding the OPEC+ meeting in Vienna.



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