Errante's The Week Ahead: 30th September - 4th October 2024

Errante’s The Week Ahead: 30th September – 4th October 2024

Highlights of the Week:

US Non-Farm Payrolls (NFP): All eyes on Friday’s jobs report to gauge the state of the US labor market amidst slowing growth.

Eurozone Inflation Data: Germany’s preliminary CPI and the Eurozone CPI Flash Estimate will be critical for ECB policy signals.

OPEC-JMMC Meetings: Oil market supply decisions could affect WTI’s direction amidst recent price drops.

Errante’s The Week Ahead: 30th September – 4th October 2024

US Data

This week will be dominated by US Non-Farm Payrolls (NFP) data, set to be released on Friday. Given that inflation in the US is now under control, staying below 3%, the labor market’s performance becomes critical for shaping the Federal Reserve’s future policy decisions. Recent trends show a slowing in the pace of job growth, with NFP trending downward over the past year. A weaker labor market could push the Fed further into dovish territory, signaling future rate cuts. In addition, CB Consumer Confidence has been softening, indicating that consumers are becoming more cautious.

This downward trend in job growth coupled with weakening consumer sentiment suggests that the upcoming NFP release will be highly scrutinized. A below-expectation figure could increase the likelihood of further stimulus measures from the Fed to lead the economy toward a soft landing instead of a hard recession.

Besides that, ISM PMIs for manufacturing and service sections will be released in the upcoming week that can provide investors with insights on economy performance. PMIs are considered leading indicators shaping market expectations.

EU Data

In Europe, the focus will be on German CPI and PMIs from key Eurozone economies. With inflation still a concern in Germany, ECB President Christine Lagarde’s speech on Monday will be closely watched for hints of how the ECB plans to navigate rising prices amidst slowing growth. Manufacturing activity remains subdued across the Eurozone, so any further contraction in the PMI readings may bolster the case for ECB action.

OPEC-JMMC Meetings

Oil traders will be watching the OPEC-JMMC meetings closely, especially given the recent downward volatility in crude prices. Any supply-side interventions from OPEC could significantly influence the next move in crude oil prices.

Market Events and Announcements

Times below are GMT +3.

Monday, September 30, 2024

3:00 AM – NZD: ANZ Business Confidence – Indicator of business sentiment in New Zealand, offering insights into economic trends.

4:30 AM – CNY: Manufacturing PMI – Measures the activity level of purchasing managers in the manufacturing sector.

4:30 AM – CNY: Non-Manufacturing PMI – Reflects the economic health of China’s service sector.

All Day – EUR: German Prelim CPI m/m – Provides early insights into inflation trends in Germany.

4:00 PM – EUR: ECB President Lagarde Speaks – Insights on ECB’s outlook for the Eurozone economy.

4:45 PM – USD: Chicago PMI – A regional indicator of manufacturing health in the US.

8:00 PM – USD: Fed Chair Powell Speaks – Important for market clues on the Fed’s policy outlook.

Tuesday, October 1, 2024

4:30 AM – AUD: Retail Sales m/m – Measures the change in retail sales in Australia, crucial for consumer spending trends.

12:00 PM – EUR: Core CPI Flash Estimate y/y – Provides early insights into inflation excluding volatile items.

12:00 PM – EUR: CPI Flash Estimate y/y – General inflation indicator for the Eurozone.

4:45 PM – USD: Final Manufacturing PMI – Final look at US manufacturing activity.

5:00 PM – USD: ISM Manufacturing PMI – A significant gauge of US manufacturing sector activity.

5:00 PM – USD: JOLTS Job Openings – Measures job vacancies and labor demand in the US.

5:00 PM – USD: ISM Manufacturing Prices – Reflects price trends in the manufacturing sector.

Wednesday, October 2, 2024

All Day – OPEC-JMMC Meetings – Influential for oil prices and global energy markets.

3:15 PM – USD: ADP Non-Farm Employment Change – Early estimate of US job growth.

5:30 PM – USD: Crude Oil Inventories – Measures changes in oil stockpiles.

Thursday, October 3, 2024

9:30 AM – CHF: CPI m/m – Swiss inflation indicator.

3:30 PM – USD: Unemployment Claims – Weekly measure of new claims for unemployment insurance.

4:45 PM – USD: Final Services PMI – Final gauge of the US service sector activity.

5:00 PM – USD: ISM Services PMI – Key indicator of US service sector performance.

Friday, October 4, 2024

11:30 AM – GBP: Construction PMI – Measures the health of the UK construction sector.

3:30 PM – USD: Average Hourly Earnings m/m – Indicator of wage inflation.

3:30 PM – USD: Non-Farm Employment Change – A key indicator of labor market health in the US.

3:30 PM – USD: Unemployment Rate – Provides the percentage of unemployed workers in the labor force.

5:00 PM – CAD: Ivey PMI – Measures business conditions in Canada’s service and manufacturing sectors.

Chart Insights: Key Levels and Impactful Events

Chart 1: USD/CAD (Daily)

USD/CAD has broken below critical support levels. The pair is now testing the 1.34399 level. If this support fails, expect further downside momentum toward 1.33835, 1.33541, and 1.33119. The weakening US economic data, particularly in the labor market and declining job openings (JOLTS), coupled with stronger Canadian GDP, could weigh on the pair.

Alternative Scenario:

If support holds at 1.34399, a rebound could see the pair retest 1.35435 (resistance 1) and possibly push towards 1.36471 (resistance 2). A stronger-than-expected NFP print on Friday could boost USD sentiment.

Key Levels:

Support: 1.34399, 1.33835, 1.33119

Resistance: 1.35435, 1.36471

Impactful Events:

NFP Data (Friday): A weaker-than-expected figure could accelerate USD/CAD downside.

CAD GDP (Friday): Strong Canadian GDP could put more pressure on the pair to the downside.

JOLTS Job Openings (Tuesday): If this shows further labor market softening, it could weigh on USD sentiment.

Stronger CAD against a potentially weakening USD amidst rising oil prices and Canadian economic strength. The key drivers remain labor market performance and GDP growth figures for both economies.

Chart 2: WTI (Daily)

WTI has recently broken below a crucial support level at $68.47. This opens the door to further downside, with the next support targets at $64.74 which is the lowest price since June 2023. If this support can’t hold, $62.71, and $60.12 become the next levels to watch. The upcoming OPEC-JMMC meetings will play a vital role in shaping market direction. If OPEC signals any production cuts, we could see a bounce. However, a failure to provide substantial support to prices could drive WTI toward lower support levels.

Alternative Scenario:

If $68.47 holds, expect a potential rebound towards $72.21, the confluence of the downtrend line and the 50-day moving average. A break above this resistance would signal a potential reversal, with targets at $75.

Key Levels:

Support: $68.47, $64.74, $60.12

Resistance: $72.21, $75

Impactful Events:

OPEC-JMMC Meetings (Wednesday): Any surprise announcements regarding supply cuts could support prices.

Crude Oil Inventories (Wednesday): A larger-than-expected inventory build could weigh further on prices, whereas a drawdown could provide support.

WTI prices remain highly sensitive to supply-side shocks from OPEC and global energy demand. Upcoming data on inventories and production cuts could create volatility, with a likely bearish bias unless OPEC signals stronger interventions.

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