With FX markets being pushed and pulled by market participants betting on when the major central banks are going to start cutting rates (or not) FX traders have some important risk events that will influence those expectations to negotiate this week. CPI and retail sales headline in the US, Aussie traders have the January Jobs report and for Sterling traders, UK GDP figures. The charts to watch US Dollar Index (DXY) – CPI to sway market pricing of a March cut Recent strong employment and growth data out of the US has seen the market reprice significantly lower the chance of a Fed rate cut in the March meeting, with odds currently sitting at around 19%, from around 50% only a couple of weeks ago.

This week’s CPI will likely go a long way to settling market expectations on this. DXY has had a strong run up in 2024 so far as continued Fed pushback on rate cut expectations has supported the USD. Key levels to watch this week are the 100 day SMA to the upside which has capped further upside in the DXY over the last few sessions, and the 200 day SMA to the downside for support.

AUDUSD – Will jobs bounce back after December’s shocker Last Tuesdays RBA meeting saw no cut as expected but with a hawkish bias in the accompanying statement. This was a relief for AUDUSD bulls after a break lower of the support level at 0.6525 on Monday looked like a significant decline was ahead for this pair. The RBA has a dual mandate of inflation and employment to look after, so this week’s Jobs report will be closely watched after the big miss in December’s figure.

The once support of 0.6525 has now established as resistance paired with the 100 Day SMA and will be a key level to watch with this week’s data as to the Aussies next move. The weeks full calendar at the link below: https://www.gomarkets.com/au/economic-calendar/

Markets enter the new week with risk-on firmly the narrative with all three major US indexes hitting all-time highs last week. In FX markets, the positive market sentiment has seen the march higher in the US Dollar hit resistance and cyclical currencies AUD, NZD and GBP bounce. Ahead this week, traders have a slew of risk events to navigate with Central Bank meetings in Canada, Japan and Europe set to headline, also some big US data in Q4 GDP and the PCE inflation reading set to move FX markets.

Charts to Watch USDCAD – Bank of Canada set to hold after hot CPI A hotter than expected December inflation reading out of Canada presumably will make any meaningful dovish shift from the BoC very unlikely in this week’s policy meeting with markets fully pricing in a hold from the central bank. The 2024 rally in USDCAD hit resistance at the 50% fib level last week and pulled back sharply to test the lower trend line support late in the week. Key levels to watch will be the 50% fib level to the upside (1.3541) if the Bank does confound analysts and take a dovish turn.

If the bank strikes a hawkish tone then the trendline support followed by the big figure at 1.34 to the downside. EURUSD – to pushback or not pushback In December’s policy meeting the ECB basically announced the end of the current rate hiking cycle. Since then markets have priced in an aggressive trajectory of ECB rate cuts this year against the backdrop of a slowing EZ economy.

Are the markets being too dovish in their predictions? This weeks ECB meeting may settle it if we see a hawkish pushback, or no pushback at all. EURUSD set new 2024 lows last week, breaking the key 1.09 support level, which has now turned into resistance.

This will be a key level to watch this week to see if it can re-establish itself as support, or continue as a cap to the upside. USDJPY - BoJ to maintain YCC No surprises are expected from the BoJ on Thursday, with the bank look set to maintain its YCC policy and negative short-term rate policy. It’s more likely any policy shift will come after the March annual wage negotiations, though the BoJ have been known to surprise before.

USDJPY has risen sharply in 2024, at these levels it does look a little overbought as it has streaked ahead of the US10Y-JP10Y yield differential which has been the main driver of this pair in recent past. We are also approaching the 150 level, where chatter of intervention may start up. The weeks full calendar at the link below: https://www.gomarkets.com/au/economic-calendar/

FX traders come into the new week with an uptick in tier one economic releases to look forward to after a very slow start to the year volatility-wise. Australian and US employment figures, UK CPI and US retail sales look to headline from Tuesday onwards (Monday is a US public holiday) The Charts to watch: AUDUSD AUDUSD has struggled to find any real direction in the last week of trading after a marked decline to start the year. The pair has whipsawed in a tight range from 0.6735 to the upside with a lower range boundary of 0.6645.

With the market still undecided on the RBA’s moves going forward (peak rates? cuts?) Thursday’s job report could see the Aussie find some direction, with the above range levels the key levels to watch. After November’s bumper figure a surprise to the downside this time round could be on the cards. GBPUSD The uptrend GBPUSD has travelled in since October has petered out somewhat in 2024 to date with Cable also trading in a directionless range for the last week.

For chartists there is a multitude of important levels to watch coming into the new week. Upper trendline and cycle high resistance along with lower trendline and cycle low support being the key levels to watch this week. To add to the mix for fundamental traders we have UK CPI and retail sales along with another speaking engagement for BoE governor Bailey.

USDJPY Bucking the trend of the low volatility of other pairs, USDJPY has had s harp rally so far in 2024, following US10-JP10 yield differentials higher. Last weeks move higher in the pair saw a disconnect in the relationship and USDJPY could struggle to push much higher unless this differential turns around. US economic releases this week will play a big part in where those yields go, with retail sales, employment and consumer sentiment all due to hit the wires from Wednesday onwards. 146 to the upside and 144 to the downside the key levels to watch for the chartists.

Full weeks calendar at the link below: https://www.gomarkets.com/au/economic-calendar/

Global markets enter the second week of the new year in cooldown mode with risk assets taking a hit after the red-hot finish to 2023. The NASDAQ having its worst start to a year since 1999, dropping almost 4% on the week, risk sensitive currencies AUD and NZD following not far behind. FX traders have a slew of CPI reports in the coming week to look forward to, with inflation readings out of Switzerland, Australia, China and the US that have the potential to get FX markets moving.

Charts to Watch Gold – XAUUSD Gold faltered last week as higher yields and a US dollar on tear weighed on the precious metal. Attempts by the bulls to push through and hold the key 2070 level were rebuffed and saw XAUUSD drop to a low of 2025 in Fridays NFP inspired volatile session. This weeks US CPI figure will be a big test of the markets pricing of Fed rate cuts, hotter than expected and gold could take another leg down with that 2070 resistance level capping the upside.

Cooler than expected could see the bulls make another attempt to breach and hold that level as support. AUDUSD AUDUSD didn’t have a great week either, having its biggest weekly drop since November. Decembers surge higher in this pair did look like to far too fast when looking at the AU and US rate differential, AUDUSD also hit a zone of resistance between 0.68 – 0.69 where sellers managed to turn the pair around.

This week’s Aussie, Chinese and US CPI readings all set to causing some volatility in the pair. Key level to watch to the upside is the resistance starting at 0.6800, to the downside the big figure at 0.6700 has lent some short-term support to this pair. US Dollar Index - DXY The US dollar has had a resurgence to start 2024 with DXY pushing through key levels 101 and 102 with ease.

Resistance at 102.57, where upside faltered in December and August ’23, has come into play and a couple of attempts to breach were rejected last week. This level also lines up with the 61.8% Fib level measured from the July lows to October highs and will be the key level to watch coming into the US CPI reading. Full calendar of the week’s economic announcements at the link below: https://www.gomarkets.com/au/economic-calendar/

Equity markets enter the second last week of 2023 on a roll, with US equities rallying for seven straight weeks and seeing all time highs in the Dow. The risk on rally was turbo charged last week after a dovish pivot from the US Fed in the December meeting saw yields and the Dollar tank and everything else bid heavily with rallies in Gold, Oil, equities, and other currencies. Looking ahead to this week, we do have a quieter calendar but there a are couple of key figures due for traders to keep an eye on, including the Feds favoured inflation gauge released on Friday.

Charts To Watch GBPJPY With the Bank of Japan set to release their latest monetary policy on Tuesday and UK CPI released Wednesday sets the scene for some volatility in this pair this week. The BoJ is expected to stand pat this time and seek gradual steps towards policy normalization. Traders will be watching for any hints of a BoJ pivot, and we could see a decent move in the Yen if they are forthcoming.

UK CPI will also be of note, after the Bank of England (unlike the Fed) pushed back somewhat against dovish rate expectations in their meeting last week, a figure outside range, especially to the downside should see a move in GBP as rates markets re-price. A widening gap in UK and JP 10 year yield differentials also putting pressure on the pair to the downside. AUDUSD AUDUSD rallied strongly last week on a weak USD and improved risk sentiment propping up the pair.

The 200 Day SMA which AUDUSD had been revolving around was broken decisively to the upside and saw AUDUSD hit 4-month highs before finding some resistance around 0.6728. Tuesday the RBA will be releasing their minutes from the December rate meeting where they could push back at the market’s view that rates have definitely peaked which would lend the AUD another tailwind. Friday see the US core PCE inflation figure released, where it is expected to hold steady at 0.2% for the month on month figure, though a beat to the upside could certainly test the market’s expectations of a dovish Fed going forward.

The weeks full calendar at the link below: GO Markets Economic Calendar

OPEC stands for the Organization of the Petroleum Exporting Countries. Founded in 1960, OPEC's main objective is to coordinate and unify the petroleum policies of its member countries to secure fair and stable prices for petroleum producers. This article briefly outlines who this organisation is and their significant influence on the pricing of oil.

Who are OPEC? OPEC has 13 member countries, including nations like Saudi Arabia, Iraq, Iran, and Venezuela, among others. OPEC holds 80.4% of the world’s proven oil reserves, while the set of 11 non-OPEC nations represent 9.7% of proven oil reserves.

With 90% of the world’s proven crude oil reserves held by these nations, they have the capability to disrupt or enhance the supply of crude oil. The list of non-OPEC nations includes Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Russia, Mexico, Malaysia, South Sudan, Sudan and Oman. And OPEC+?

OPEC+ refers to OPEC and its alliance with other major oil-exporting countries that are not part of OPEC. OPEC+ aims to bring more coordination to global oil production levels, thereby stabilizing prices. The most notable non-OPEC country in OPEC+ is Russia, but the group also includes Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan And what are the “Observer states”?

Observer states do not have voting rights in OPEC decisions but may be invited to participate in discussions, share perspectives, and sometimes even coordinate policies informally with OPEC members. The status of observer can serve as a preliminary step before becoming a full member, although this is not always the case. Observer state countries include Canada, Egypt, Norway and Oman.

What Does OPEC do? Production Quotas: Both OPEC and OPEC+ set production quotas for member countries to balance supply and demand in the global oil market. These quotas aim to stabilise or increase oil prices depending on prevailing market conditions and arguably to meet their needs as oil producing nations.

Market Monitoring: The organisations monitor global economic conditions, energy markets, and supply/demand factors to inform their decisions. Policy Coordination: Through regular meetings, OPEC and OPEC+ members coordinate their national policies regarding oil production. Data and Research: They gather and publish data on oil production, exporting, and pricing, providing valuable insights into the global oil market.

How Do They Do It? Regular Meetings: Both OPEC and OPEC+ hold regular meetings to review current market conditions and decide on production quotas. Technical Committees: These are specialized committees that analyze market conditions and recommend policies.

Joint Ministerial Monitoring Committee (JMMC): In the case of OPEC+, this committee reviews compliance with agreed production quotas and recommends corrective measures if needed. Consensus Decision-Making: Decisions, especially in OPEC, are generally made by unanimous agreement, although OPEC+ operates more on a negotiated basis between its leading members. Market Implications of OPEC Decision Making A knowledge of both the direct and wider indirect influence of OPEC on financial markets is worthwhile as this goes across the majority of asset classes, and therefore can influence traders significant irrespective of their preferred trading instrument.

These include: Oil Prices: OPEC and OPEC+ decisions hold significant sway over global oil prices. These organizations, representing a substantial portion of the world's oil production, can influence supply levels through production cuts or increases. Consequently, their actions often result in immediate and sometimes substantial effects on oil prices.

Higher production quotas tend to lower prices, while production cuts can drive prices upward. These price fluctuations impact both energy companies and consumers, as they affect fuel costs and energy-related expenses. Stock Markets: While energy stocks and indices are particularly sensitive to OPEC/OPEC+ decisions, the broader stock market is also affected.

This broader impact arises from the economic implications of oil price changes. For instance, rising oil prices can lead to increased production costs for many businesses, potentially impacting corporate profits. Conversely, lower oil prices can benefit various industries but may negatively affect energy sector companies.

Therefore, stock markets, as a whole, as well as individual stocks react to these shifts in energy prices, influencing investment strategies and market sentiment. Currency Markets: Changes in oil prices can have a cascading effect on currency markets. Oil-exporting countries e.g., Canada, often rely heavily on oil revenues to support their economies.

When oil prices rise, these countries tend to experience increased income, which can strengthen their currencies. Conversely, falling oil prices can weaken their currencies. This currency impact, in turn, affects Forex markets as traders adjust their positions based on shifts in exchange rates driven by oil price movements.

Inflation: Oil prices have a direct and immediate impact on inflation levels worldwide. This is because energy costs are a significant component of the Consumer Price Index (CPI) in many countries. When oil prices rise, it often leads to higher transportation and production costs, ultimately contributing to inflation.

Central banks closely monitor inflation levels, and significant changes can influence their monetary policies, including decisions on interest rates. Thus, OPEC's choices can indirectly affect central bank decisions, which, in turn, impact financial markets. Geopolitical Implications: The decisions made by OPEC and OPEC+ are not just economic; they also have geopolitical ramifications.

Oil is a strategic resource with far-reaching geopolitical significance. Countries that are major oil producers often wield considerable influence on the global stage due to their energy resources. Therefore, OPEC's decisions can sometimes lead to geopolitical tensions or alliances, affecting international relations and potentially impacting global security.

Sector Impact: Certain industries are highly dependent on oil prices. Airlines, transportation, and the automotive sector, for instance, are profoundly affected by OPEC/OPEC+ decisions. Airlines may experience changes in fuel costs, which can significantly impact their operational expenses and profitability.

Similarly, transportation companies and automakers rely on affordable fuel prices to maintain competitive pricing and consumer demand. Consequently, OPEC's choices can ripple through these sectors, influencing business strategies, stock performance, and investor sentiment. Summary Although by no means the only influence on the price of oil and related assets, OPEC undoubtedly plays a major part.

For traders, particularly those involved in commodity trading, energy sectors, or currencies of oil-dependent countries, understanding the dynamics of OPEC and OPEC+ is crucial. Their decisions can create volatility and trading opportunities, but also pose risks that need to be managed carefully. A knowledge of timing of OPEC meetings and observation of the impact of OPEC statements are a great start point in managing such risks and taking advantages of opportunities that may exist.