The two most important events for today are the OPEC meeting and the US NFP data. Both events command extreme importance and if volatility is the name of your game, then today’s trading session could provide a number of opportunities. The dollar index has eased off yesterday after a very disappointing day due to a very hawkish approach utilized by the European Central Bank.
The economic data released in the US has not produced any kind of bets on which you can dance, especially with respect to iSM components. The ISM manufacturing data released earlier this week confirmed that the industry is still suffering, but the ISM non manufacturing number -which came yesterday, has led to believe many in the markets that fundamental story is changing. The greatest fear for the US market is that the Fed does increase the interest rate when the economy is slowing down. Yes, it is true that Fed Chairwomen is itching to raise the interest rate and if she delivers on these this month, she needs to adopt one element religiously. An immensely dovish approach could cap the upside potential for the dollar index. The US, undoubtedly, can not afford to have the strong dollar as it shaves off large element of export figure and it also adds more pressure for the companies involved in this line of business.
The employment component of the ISM non manufacturing data does provide us a clear signal that the US NFP data due later on today could be very soft. If the manufacturing and services PMl loses its mojo, it is extremely difficult to argue that the NFP will still be a robust number. So, the question is what is the number which can keep the fed on their path to lift off the interest rate. We believe that anything above the 150k will justify their move.
What really matters for the US dollar is the forward trajectory adopted by the Fed in order to raise the interest rate. Raising rates aggressively will not work in their favor, as it will make the dollar to touch the sky.
OPEC members are meeting in Vienna and will decide if they want to curb oil supply. There is no doubt that we have too much oil in the market, as compared to the demand, but what really matter for the OPEC members these days is to keep hunting for their own market share. The price war in this arena is intense and as long as we do not see this easing off, there is a little hope of cooperation among the OPEC.
We have repeatedly mentioned that it is not entirely up to the OPEC members to balance the oil market- as those days are long gone. If you are serious about managing the supply, the action should be collaborative from both ends – OPEC and non OPEC members. Even if we see a cut from OPEC members today, we are not sure if a similar move can be seen by Russia and the USA- the two big players.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam