OPEC+ Delays Meeting, US NFPs Are Under The Radar

Yesterday, we received slightly disappointing manufacturing PMI data from various countries across the globe. Nevertheless, the numbers stayed in expansionary territories. OPEC+ delays meeting due to disagreements in production output. Today, the spotlight may fall on the US NFPs, as the Fed will keep a close eye on the jobs numbers as well.

SLIGHT DISAPPOINTMENT IN THE DATA

It was quite an eventful day yesterday, in terms of economic data releases. Thursday’s morning kicked off with China delivering its Caixin Manufacturing PMI figure, which showed up at 51.3, when the initial expectation was for a slight decline only from the previous 52.0 to 51.8. Although the actual number came as a disappointment, market participants are still keeping their “positive hats” on, as the number still shows that Chinese manufacturing remains in expansionary territory. UK’s manufacturing PMI also failed to beat the forecast and came out at 63.9, against the initially expected 64.2. The British currency was the biggest loser yesterday among its major counterparts.

The US dollar was the strongest yesterday, as it took the role of a safe-haven, due to a slight disappointment in the US data releases. Although the US initial jobless claims were on the better side, as the number came out below the initial forecast, the continuing jobless claims failed to beat expectations. This means that despite a small decline in the number of new people filing for unemployment benefits, there is still a vast number of US citizens continuing to seek financial support from the government. The ISM manufacturing PMI for June also came out as a disappointment, at 60.6, which is slightly below the initial forecast of 61.0, which was already lower than the previous 61.2. Although the US indices closed in positive territory, the gains were on the modest side.

OPEC+ DELAYS MEETING

Also, yesterday, the OPEC+ meeting got delayed until Friday, apparently due to UAE not agreeing with the proposed increases in production of barrels per day. There were reports that Kazakhstan and Iraq also supported UAE, as their economies heavily depend on oil prices and any increase in production could bring the price of oil lower. The main countries that were for the increase were Saudi Arabia and Russia, stating that the rise in bpd would be justified, due to a jump in global demand, as economies are working on post-covid recoveries. If the agreement is reached and the countries agree to an increase, we might see oil correcting slightly to the downside, however, the current global demand may still push oil prices further north.

WTI OIL — TECHNICAL OUTLOOK

WTI oil made a strong move north yesterday, overcoming the June high, at 74.54. The commodity is also trading above a couple of short-term tentative upside lines, a steeper one taken from the low of June 29th, and another one drawn from the low of May 21st. As long as both of those line remain intact, we will continue aiming higher.

The price may correct a bit lower, however, if the commodity stays somewhere above one of the aforementioned upside lines, the bulls could take advantage of the situation and push WTI oil higher again. The price might rise to yesterday’s high, at 76.29, where the commodity could stall for a bit. However, if the buying continues, the buyers may overcome that obstacle and drag WTI oil towards the 76.79 hurdle, or the 77.77 level.

In order to consider the downside, a break through both of the previously mentioned upside lines is needed. In addition to that, if the price falls below the 72.90 zone, marked by the low of June 30th, that may attract more bears into the field. WTI oil might slide to the 72.07 area, a break of which could clear the path towards the 70.92 level, marked by the low of June 21st.

US NFP IN SPOTLIGHT

Today, the spotlight most likely will fall on the US jobs data for the month of June. The non-farm payroll figure is believed to have improved, going from the previous 559k to 700k. The unemployment rate is also expected to drop by a bit, falling from 5.8% to 5.7%. If the forecasts are true, this could be a good sign for the overall US economy. However, market participants who are invested in equities, might get a bit worried, as better data could force the Fed to revise their current strategy and push towards raising interest rates slightly earlier. This might have a negative effect on stock prices, as higher borrowing costs could make riskier assets, such as equities, less attractive.

USD/JPY — TECHNICAL OUTLOOK

Yesterday, USD/JPY continued its journey to the upside and remained above the highest point of June, at 111.11. At the time of writing, the pair is finding strong resistance near the 111.66 barrier. At the same time, the rate is trading well above a short-term upside support line taken from the low of May 25th. For now, we will stay positive with the near-term outlook.

If USD/JPY eventually bypasses the 111.66 barrier, this will confirm a forthcoming higher high, potentially setting the stage for a further move north. That’s when we will aim for the 112.22 obstacle, which is the highest point of 2020, where a temporary hold-up may occur. That said, if the buying doesn’t stop there, the next possible target could be at 112.40, or even at the 112.66 level, marked near the low of December 17th and the high of December 19th of 2018.

Alternatively, if the rate suddenly falls back below the 111.02 zone, marked by yesterday’s low, that could open the path towards the 110.75 obstacle, a break of which may lead to a test of the 110.42 level, marked by the low of June 30th. Around there the pair might also test the aforementioned upside line, which could provide additional support.

AS FOR THE REST OF TODAY’S EVENTS

We have Canada’s trade balance and the US factory orders, all for May. Canada’s trade surplus is forecast to have declined somewhat. US factory orders are expected to have rebounded after sliding in April.

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Originally published at https://www.jfdbank.com.

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