Crude oil rallies on OPEC+ supply shock, US Dollar cheers risk aversion

A fresh bout of risk aversion kicks off the NFP week as OPEC+ surprises markets with a supply cut on Monday. However, receding hawkish bets on the Fed and mixed US data allowed bears to take a breather, even as the crude oil prints the biggest daily gains since March 2022.

That said, downbeat economics from China and Japan joined mixed Aussie data to entertain markets during the initial hours of the key week comprising the US NFP and multiple central bank events in the Asia-Pacific region.

US Dollar remains firmer and so do the yields even as S&P 500 Futures fail to trace Wall Street’s gains. Further, stocks in Asia remain mixed and those in the West begin the trading week with mild losses.

Gold prices extend the previous day’s losses while USDJPY rallies the most among major currency pairs. That said, the NZDUSD bears the burden of NZIER’s dovish RBNZ forecasts whereas USDCAD struggles to cheer strong Oil prices.

Elsewhere, cryptocurrencies remain depressed for the third consecutive day amid the US Dollar rebound, as well as due to the fears of a downbeat second quarter (Q2) 2023 performance on regulatory concerns.

Following are the latest moves of the key assets:

• Brent oil prints 5.5% daily gains around $84.60 despite recently easing from a one-month high.
• Gold prints mild losses near $1,960 during two-day downtrend.
• USD Index extends the previous day’s gains to 102.70 even if the DXY bulls retreat of late.
• Wall Street closed in the green but the equities in the Asia-Pacific region, as well as shares in Europe and the UK, grind lower of late.
• BTCUSD and ETHUSD remain pressured for the third consecutive day around $28,000 and $1,800 in that order

OPEC+ stole the show…

A surprise 1.16 million barrels a day output cut from OPEC+ triggered risk aversion early Monday, amid concerns that higher oil prices will renew inflation fears. However, the easing of hawkish bias surrounding the Fed and recently mixed US data tame the risk-off mood as traders await Friday’s US jobs report.

While the OPEC+ moves propel Crude Oil prices and allowed the US Dollar to ignore downbeat Fed bets, pre-NFP caution challenges the traders and resists portraying major moves outside the Crude oil.

Even so, the commodities and the Antipodeans were down amid firmer USD while equities remain pressured and stocks trade mixed.

Further, US Dollar moves and second-tier PMIs entertain traders amid a softer start to the crucial week, if we ignore the OPEC+ production cut.

• Strong buy: USDJPY
• Strong sell: ETHUSD, GBPUSD
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

PMIs, risk catalysts are in focus

With the recent reassessment of the risk-off mood, as well as the mixed data from the Asia-Pacific region, traders may closely observe the US PMIs for clear directions. Also important to watch will be the inflation chatters and bank-related headlines, not to forget the market’s bets on the FOMC rate hikes.

May the trading luck be with you!