week ahead of June 27

The coming week sees the close of the latest volatile quarter. Commodity prices are back in focus, A new round of lockdowns in China saw copper plummet while oil is down before OPEC meets this week.

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Week in review

• The stock market took a turn for the worse following commentary by Fed Chair Powell but saw a relief rally to close higher for the week.
• The US dollar has topped out for the time being with bulls taking profit since the shock 75 basis point hike last week.
• One of the largest port cities in China announced another round of lockdowns after detecting two cases of covid, sending copper to a 15-month low.
• After several days of restricted gas flow into Europe from Russia, Germany declared a "stage 2" of its emergency gas plan allowing companies to pass on increased costs to consumers. 
• Weaker PMI figures boosted the chances of recession but didn’t translate to any risk-off action in markets.

Top events in the week ahead

Global PMIs in focus

The theme for the week is likely to be PMI figures concentrated in the latter half of the week. Flash figures of major economies came in below expectations, narrowly avoiding falling into contraction. First to report is China's NBS PMI, which is expected to come out of contraction. 

On Friday, European PMIs are expected to fall close to contraction, with a similar story from the US later in the day. Other leading indicators in the EU include the preliminary release of July Germany’s GfK consumer confidence, which is expected to fall further.

EUR/USD is trading in a tight range between $1.0460 and $1.0600. Further signs of recession coming in Europe could prompt a leg lower to expose $1.0400. 

Of note, the US won't report NFP until next week, even though the first of the month is Friday.

OPEC+ to talk about output levels

OPEC+ is set to meet on Wednesday after previously agreeing to pull forward planned production hikes from September. Recessionary pressures might curb oil demand, which will be a consideration for further output increases. On the other hand, supply is tight, and US production has not accelerated to offset Russia’s shortage. 

WTI slid below its 50-day average at $110/bbl this week, eyeing $100/bbl next. Inversely, $110/bbl is now resistance if prices rebound from the recent sell off.

Other data points

Key data points coming out as analysts try to ferret out how central banks will try to balance combating inflation without causing a recession. First are durable goods orders from the US, which are expected to show another monthly decline. On Tuesday the US is expected to show a widening trade balance, with growing retail inventories. USD/JPY could slide lower, continuing to receive relief from 137.71. Currently at 134.70, 132.00 is major support that needs to hold by the end of the week. On the upside, the bulls eye 140.00 next.

On Wednesday it's Europe's turn with consumer confidence and economic sentiment figures. That is followed by preliminary June CPI from Germany, and then France the next day. Thursday sees European unemployment figures.

Japan reports retail sales on Wednesday as analysts are looking to see what impact rising inflation has on buyer behavior. Consumer sentiment comes out right after that. Australia also reports retail sales, which are expected to decelerate a bit. AUD/USD has support at $0.68300 and resistance at $0.7000. 

Earnings

Notable corporate earnings include Nike, Babcock, Stagecoach and H&M.