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Week Ahead: OPEC, Non-Farm Payrolls, and RBA Lead the Way

Monday is a US and UK holiday; therefore, market activity should be extremely slow.  Month-end flows on Friday saw the US Dollar spike near the US bond open, only to be sold off into the London fix.  OPEC meets this week and it is still up in the air as to whether they will increase production or not.  The RBA meets this week as well.  The central bank has signaled they are on hold until 2024, but will the RBNZ’s recent forecast of rate hikes in the second half of 2022 cause the RBA to flinch? Non-farm Payrolls out of the US will be released on Friday.  Given the ugly miss last month, it’s anyone’s guess as to how May’s data will play out.  Current expectations are for 610,00 jobs to be added.

OPEC

OPEC+ seems to meet on almost a monthly basis now.  Earlier in the spring, OPEC+ announced they would gradually increase supply to 2 million bpd.  Analysts expect members to maintain the current plan, thus increasing the remaining 840,000 bpd in July.  With major economies continuing to reopen, sans India and Japan, OPEC+ should maintain current policy until their next meeting.   Any increase in output at the meeting should come as a surprise to the market. (See Matt Weller’s full OCPC preview here). One of the main discussions that member nations will face this week is how to deal with any Iranian supply that may be added to the market if US sanctions are lifted.  However, that will depend on the timing of any agreement between the US and Iran, as well, as the amount of oil Iran will be allowed to send to the market.  During the first few of Iran’s return to market, the amount offered may be inconsequential to overall OPEC+ supply.

Central Banks

Last week, the RBNZ held their interest rate decision meeting and surprised the markets with their latest forecasts, which suggested  a rate hike by Q3 2022.  The RBA meets this week, though no changes are expected.  As a matter of fact, the RBA has stated at previous meetings that they have no intention of lifting highly supportive monetary conditions until at least 2024!  They also continue to target the 3-year yield of 10 bps, though they said at the last meeting that they would consider switching maturities at the July meeting.  Thus far, the RBA and the ECB are the most dovish of the central banks, as the RBNZ has left the group.  The US is close behind, however, higher inflation readings during the month of April has led some Fed officials to comment that the Fed is “talking about talking about tapering”.  Expectations of any Fed announcement of tapering are not expected until the late summer or early fall.  The BOC and the BOE are the most hawkish of the developed central banks, having already begun tapering their bond purchases.  As for the BOJ, they are eternal doves. It will be years before the central bank can do anything material to effectively reduce monetary stimulus.

Jobs, Jobs, and more Jobs

Economic data comes back to the forefront this week with Non-Farm Payrolls for the US and  Employment Change from Canada.  Expectations are for +610,000 and +200,000, respectively. Average  Hourly earnings will be an important focus for the jobs data, as central banks will be keen on whether the higher inflation readings in April have flowed over into the higher paying jobs. In addition, revisions to the April figures will be closely watched.  Recall that in the US, the expectation was for +920,000 while the actual reading was +266,000.  Canada’s employment change expectations were for -177,000, while the actual figure was -207,000.  Also this week, China releases PMI data and the US releases ISM data. The more important data releases are as follows:

Monday

  • US and UK holiday
  • Japan: Retail Sales (APR)
  • Japan Industrial Production Prel (APR)
  • China: NBS Manufacturing PMI (MAY)
  • China: Non-Manufacturing PMI (MAY)
  • Australia: ANZ Business Confidence Final (MAY)
  • Japan: Consumer Confidence (MAY)
  • Japan: Housing Starts (APR)
  • Germany: Inflation Rate Prel (MAY)
  • Canada: PPI Final (APR)
  • Canada: Raw Material Prices (APR)

Tuesday

  • OPEC – JMMC Meeting
  • Global Manufacturing PMIs (MAY)
  • New Zealand: Building Permits (APR)
  • Australia: Building Permits (APR)
  • China: Caixin Manufacturing PMI (MAY)
  • Australia: RBA Interest Rate Decision
  • Germany: Retail Sales (APR)
  • Germany: Unemployment Rate (MAY)
  • EU: Inflation Rate Flash (MAY)
  • Canada: GDP Growth Rate (Q1)
  • US: ISM Manufacturing PMI (MAY)

Wednesday

  • New Zealand: Trade Balance (Q1)
  • Australia: RBA Chart Pack
  • UK: BOE Consumer Credit (APR)
  • EU: PPI (APR)
  • Canada: Building Permits (APR)

Thursday

  • Global: Service and Composite PMIs Final
  • Australia: Trade Balance (APR)
  • Australia: Retail Sales (APR)
  • China: Caixin Services PMI (MAY)
  • US: ADP Employment Change (MAY)
  • US: Unit Labor Costs Final (Q1)
  • US: ISM Non-Manufacturing PMI (MAY)
  • Crude Inventories

Friday

  • Australia: Home Loans (APR)
  • EU: Construction PMI (MAY)
  • EU: Retail Sales (APR)
  • Canada: Employment Change (MAY)
  • US: Non-Farm Payroll (MAY)
  • Canada: Ivey PMI (MAY)
  • US: Factory Orders (APR)

Earnings

The earnings calendar will be light for the next month as we head into Q2.  However, some of the more notable releases this week are as follows: HPE, ZM, LULU, WORK, DOCU, CRWD, AVGO

Chart of the Week: Monthly Bitcoin (BTC)

Source: Tradingview, FOREX.com

The end of month always brings with it so many great monthly timeframe charts to look at.  However, given the interest surrounding Bitcoin lately, the monthly Bitcoin chart stands out!  “Sell in May and Go Away” seems quite appropriate while looking at this chart.  After the extreme runup from 9825 in September 2020 to April’s highs of 64895, Bitcoin began to sell off aggressively! April’s candlestick formation and the overbought RSI gave us a clue that the selloff was ahead.  The candlestick formation is “close to” an evening star, which is a reversal pattern.  (The only reason it isn’t is that he real bodies of the March and May real bodies overlap slightly.)  At the very least, the April candlestick is a Doji, which is a sign of indecision.  In May, Bitcoin sold off to the 61.8% Fibonacci retracement level from the September 2020 lows to the April highs, and could only bounce to near the 50% retracement level.  Resistance on the monthly timeframe is at April’s low of 47004, then May’s high at 59603.  Support is at the May lows of 30055, just ahead of the January lows at 27734.  There’s a saying that goes like this: “Big green candles are followed by more big green candles; Big red candles are followed by more big red candles”.  Given the magnitude of the selloff of Bitcoin in May, long-term HODLers of Bitcoin are hoping this isn’t the case!

The week ahead could bring volatility as beginning of month flows enter the markets.  In addition, the OPEC and RBA meetings may bring some surprises which affect oil and the Australian Dollar.  The culmination of the week will bring US and Canadian jobs data.  Lately, these data releases have brought volatility along with it.  Let’s hope it continues.

If you are on holiday on Monday, enjoy the long weekend and stay safe.

If you will be trading Monday, trade carefully as there may be some volatile moves on light volume!

Have a great weekend!

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