The Week Ahead – OPEC, NFP, RBNZ to drive another volatile week?

The week will start with OPEC+’s next plan on production. The cartel is expected to release more oil into the market as demand continues to meet up with the current output, thus pushing oil prices higher. WTI completed a 6th consecutive week of gains last week, thereby gaining over 22% within the period. WTI could challenge the $77 peak this week if the bright mood continues. Oil and Petro currency, especially CAD, traders should watch out as a delay in production hike would ensure $77 is taken out fast while a significant addition could lead to a minor corrective dip.

Last week was very volatile but this week could even be more. All eyes will be on the US Job reports on Friday. September estimate is much better than August’s figures. At the same time, the Canadian job figures could add extra firepower to the Loonie which has been strong for many days, thanks to massive rallies in the oil market. The market expects lower CAD job figures.

Before Friday, we have other key economic data to look forward to including the US ISM Services PMI on Tuesday and the US ADP Non-Farm Employment change on Wednesday. Spanish Unemployment Change on Monday, US Crude Oil Inventories on Wednesday and the CAD Ivey PMI might be less anticipated but could ignite sharp short-term moves if there is a massive deviation from the market’s estimates.

The RBA and RBNZ will attract the biggest attention next week. RBA on Tuesday is expected to keep the official cash rate at 0.1%.

However, its closest counterpart in New Zealand could lead the way in the interest rate hike on Wednesday. The market estimated a 100% rate hike from 0.25% to 0.5%. Disappointments (released figure below 0.5%) could force the NZD down across the board. However, a rate hike, although expected, should push the NZD upside. Traders should also watch out for the tone as the country still battles variants of Covid.

As for Bank speeches, FOMC member Quarles, BoJ Governor Kuroda and ECB’s Lagarde will all speak at different events on Tuesday before BoC Gov Macklem on Wednesday.

Last week, risk sentiment was very weak for most of the week. Stocks bled as the US debt profile gave much concern to investors. Higher US treasury yield pushed the dollar index to 94.5 for the first time since November 2020. Also, the NI protocol and shut down of fuel stations in the UK put massive pressure on the GBP.

However, the overriding risk-off sentiment relaxed on Friday as the equities market regained some of the losses and the dollar shed some of the gains. Whether that will result in a complete sentiment shift to risk-on this week remains to be seen.

Traders should look forward to more reversion on the dollar before Friday’s NFP. Meanwhile, risk-on CAD will depend on the OPEC+ meeting on Monday before Wednesday’s BoC speech and Friday’s job reports. Possible RBNZ rate could dig out the NZD from the pit but a surprise RBA rate hike would have a stronger bullish effect on the Aussie.

Oil should climb if OPEC+ declines adding to output but a significant addition could lead to a sharp correction. Gold has been under massive pressure as the US 10Y broke upside last week. However, with Thursday and Friday’s lower yield, the commodity broke upside. We should see more rallies this week toward 1800.