Over the weekend, OPEC+
delivered some good news for the oil market, indicating
their intention to maintain prices above the $70 mark. Notably, Saudi Arabia
declared an additional voluntary production cut of 1 million barrels per day
(bpd) commencing in July, initially for one month, with the possibility of
extension based on market conditions. Furthermore, all other members of OPEC+
will prolong their production cuts throughout 2024.

While the OPEC+ supply cuts
may generate short-term bullish sentiment, it is important to recognize that
during a contractionary business cycle, the demand side heavily influences the
oil market. As evidenced by the recent surprising production cut, which was soon
after faded, oil prices experienced a sharp decline from the $83 peak to $64.
However, had it not been for the Sunday cut announcement, prices could have
dropped even further by now.

The economic data this week
has also weighed on the oil market as we got big misses in the US ISM Services PMI and the US Jobless Claims yesterday.

WTI Crude Oil Technical
Analysis – Daily Timeframe

On the daily chart, we can see that oil just can’t
break above the $75 resistance as it
looks like we have found another range at a lower price level. That’s been the
case for quite some time now that the oil market gets stuck in ranges at lower
and lower levels as demand drops and OPEC+ cuts to avoid a bigger selloff in
prices. The support level at $64.30 will be key to watch as a break below that
should increase the selling momentum.

WTI Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that there isn’t
much to glean from this chart as the price action remains erratic beneath the
resistance zone. It’s just about waiting for a clear breakout or a fundamental
catalyst.

WTI Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we
have a support zone at the $70 level. The buyers are likely to lean on this
zone to target the $75 level first and new highs afterwards. The sellers, on
the other hand, will want to see the price breaking lower to pile in and extend
the selloff towards the $64 support.

This article was written by ForexLive at www.forexlive.com.

Headlines:

• A mostly sideways session in European morning trade
• How’s the Fed outlook shaping up to be right now?
• PBOC governor says expects inflation to gradually rebound in 2H this year
• French finance minister says gotten pledge from manufacturers to lower prices
• Japan PM Kishida to hold press conference on 13 June

Markets:

• NZD leads, JPY lags on the day
• European equities lower; S&P 500 futures flat
• US 10-year yields up 3.7 bps to 3.751%
• Gold down 0.1% to $1,965.53
• WTI crude up 0.3% to $71.50
• Bitcoin down 0.2% to $26,590

It’s just one of those days where markets decided to take a bit of a breather, as we start to turn the page to next week’s main events.

There wasn’t any real conviction in the market moves today as trading appetite is sapped considering that there are no more major economic releases before the weekend. We do still have the Canadian jobs report to come later but that isn’t one to reverberate to broader market sentiment.

The dollar is largely steady but trading more mixed on the day with gains against the euro, yen and franc but now slightly lagging against the commodity currencies. USD/JPY in particular is just swinging around 139.40-60 mostly with large expiries sandwiching price action at 139.00 and 140.00 today.

In the equities space, the mood remains rather subdued with US futures keeping little changed mostly and European indices tracking just slightly lower now in the last hour after a relatively sideways session.

We’ll see what Wall Street has to offer later but there doesn’t seem to be much conviction across the board for now. However, that might still change up before the weekend. That being said, next week’s US CPI and Fed decision will still be the make or break moment for markets moving forward.

This article was written by Justin Low at www.forexlive.com.

Here’s a look at the changes in the Fed funds futures curve over the last one week and compared to a month ago:

After the US jobs report on Friday last week, traders moved in to further price a higher for longer narrative by the Fed and that hasn’t changed by much even after yesterday’s weekly jobless claims data.

And when you compare to a month ago when traders were pricing in three rate cuts by year-end, it’s been a dramatic shift in the outlook as the Fed succeeded in getting their message through.

It all comes down to what the next message will be from Powell & co. as they make their decision next week. If they keep rates unchanged i.e. pause, I would expect it to be a hawkish one (or at least an attempt to be) as they are likely to talk up chances that they could only be „skipping“ a meeting before raising rates again.

However, we know how easily markets can waver and all it will take is just one misworded communication and the dovish floodgates will open.

But if the Fed does decide to raise rates by another 25 bps, that will certainly mean more pain for risk assets and there will be significant repricing across broader markets. In turn, expect that to spur a strong rally in the dollar unless the Fed explicitly says that this would be their final rate hike and that they will pause to reassess moving forward.

This article was written by Justin Low at www.forexlive.com.

Last Friday’s release of
the NFP report once again exceeded expectations,
maintaining its impressive streak of positive results for 14 consecutive instances.
However, upon closer examination, the report unveiled less favourable findings.
The unemployment rate saw a significant jump from 3.4% to 3.7%, representing
the largest month-over-month increase since the pandemic began. Additionally,
there was a slight reduction in average workweek hours, a potential indicator
of impending layoffs by employers. Overall, the report presented a combination
of data that could be interpreted differently by different participants.

Shifting our attention to
the US ISM Services PMI, it reported a considerably lower
figure of 50.3, falling short of expectations and narrowly missing the threshold
for contractionary territory. The employment sub-index indicated contraction,
and the prices paid sub-index experienced a substantial decline, returning to
levels last observed in May 2020. Consequently, the market reacted by further
reducing the likelihood of the Federal Reserve implementing additional interest
rate hikes.

The recent surprising BoC rate hike boosted the CAD and the big miss in
US Jobless Claims yesterday weakened further the USD
as the market is getting increasingly comfortable with the idea that the Fed
may be nearing the end of the tightening cycle even if it leaves a door open
for another hike.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, the USDCAD eventually broke
below the 1.34 support and
extended the selloff as the BoC delivered the rate hike. The price is now near
the 1.3300 handle, and we started to see some consolidation as the market is
looking forward to the next week’s CPI report and FOMC meeting. We
might see a bounce or just a rangebound price action until then, so it would be
better to just wait until those risk events are out of the way and we get a
clearer picture.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that USDCAD ranged
a bit at the 1.34 handle and then broke out as the sellers leant on the red 21 moving average and
pushed the price lower trading into the BoC meeting. We are now seeing some
weakening momentum falling right into the 1.33 handle as depicted by the divergence with the
MACD. That’s
generally a signal of an imminent pullback or reversal, so we may see some
profit taking at the 1.33 level, if the price gets there, as traders may want
to take out some risk before the next week’s events.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
clearly the recent breakout of the box at the 1.34 handle. The USDCAD hasn’t done
much since the BoC rate hike and the big miss in US Jobless Claims. This should
be a clear sign that the market is awaiting the CPI and the FOMC before getting
the conviction for the next direction. The levels to watch are of course the
1.33 support and the 1.34 resistance. A break to the upside, may take us to the
1.3553 resistance again, while a break to the downside should result in a test
of the key 1.3225 level first and possibly a breakout afterwards.

This article was written by ForexLive at www.forexlive.com.

Major currencies are almost no different from the earlier snapshot here. EUR/USD is down slightly by 0.2% to 1.0760 but keeping within a 25 pips range only for the day. Meanwhile, USD/JPY is up 0.5% to 139.60 but again the pair is rather confined in between large option expiries between 139.00 and 140.00 currently. Besides that, there is a rather subdued mood everywhere else.

It’s a bit lifeless in equities space as well with US futures little changed near flat levels while European indices are also barely showing any change after the opening two hours. Here’s a look at how they are doing:

• Eurostoxx +0.1%
• Germany DAX flat
• France CAC 40 +0.1%
• UK FTSE +0.1%
• S&P 500 futures flat
• Nasdaq futures +0.1%
• Dow futures -0.1%

Talk about a snoozefest, eh? Meanwhile, bond yields are holding higher at least with 10-year Treasury yields up 3.3 bps to 3.747%. However, that just eats slightly into the over 7 bps drop yesterday after traders reacted to the US weekly initial jobless claims data.

This article was written by Justin Low at www.forexlive.com.