A1 Trading Company

This week is full of earnings from big tech as we wait for Google, Microsoft, Meta, and Tesla. This month has been mostly in the red and are coming off a 6-day losing streak in the S&P. With tensions in the Middle East escalated, earnings hopes to save the markets.

EdgeFinder Analysis

Silver sits at a stronger bullish reading than gold as the trend score declines this morning. Unlike gold, other metals tend to perform bullishly off healthy economic data. It is also correlated to gold in the sense that geopolitical tensions work in silver's favor.

Iran was attacked by Israel in a retaliation response to Iran's missile barrage earlier last week. The stock market is still not showing signs of a shift towards optimism due to these strikes from both countries. Gold is up, yields are falling and dollar is falling too.

There are several levels of support that the S&P could test on the 1D timeframe. Price tested the $4,927 level on Friday and is stuck between support and resistance. The move looks indecisive as we have mixed feelings going into the week.

Although it looks bearish in the short term, a 10% pullback sounds like a healthy retracement from the overextended highs we've experienced in the past handful of months. A pullback of this magnitude would only be giving back what the index has made this year.

Among dollar pairs, GBPUSD is the strongest bearish reading on the EdgeFinder. A -11 score shows a slight improvement from Friday which was -13, but it might not be enough to flip the sentiment around. COT shows an aggressive positional change to bearishness this week while retail remains majority long this pair.

One factor that could help this pair's optimism lies in the US earnings this week. Big tech is set to report in the next few days and will likely cause some sort of volatility to the mix. Beats on estimates are important, but we also need to pay attention to the forecasts for next quarter as well.

Retail Spotlight

Crypto, metals, small caps oil and NASDAQ are now the majority long positions from the crowd. GER30, USDJPY and UK100 are the top shorted assets. Traders might be looking for a reversal in the US indices, thinking it has dropped substantially.

Smart Money Spotlight

COT shows an aggressive buy on the S&P and bond prices. The dollar saw minimal interest last Friday. Among the top shorted assets from smart money, we have GBP, CAD EUR and CHF. All of these currencies are forecasted to see lower rates before the dollar.

Fundamental Spotlight

Despite economic growth and steady labor conditions, investors still seem to think that stocks will be on the decline in the next 6 months from now. The next report will be on Wednesday to see how much this gap has changed and whether or not we get any improvement from the bearishness happening in the markets.

Indices continue to hurt as the US economy points further towards higher inflation this year. The Fed now has to decide whether or not it is worth cutting rates so soon. And if rate cuts are off the table, the sentiment shift might have redirected back to risk-off.

EdgeFinder Analysis

GU is one of the strongest bearish pairs on the EdgeFinder right now. The score is now -10 due to the downtrend slowing a bit. Retail is still long this pair while COT continues to buy USD and sell GBP. Because this pair is somewhat correlated to the US stock market, it will likely suffer more loss if the market does.

With threats of retaliation from Israel on Iran, investors look to put their money elsewhere outside of risk-favoring assets. So, they may flock to things like gold or the dollar, which is likely why the pound is seeing more funds pulled out of the currency from smart money.

Gold is still very strong on the 1D timeframe. Price clearly does not want to break under the support zone around $2300 despite rising yields. This is a concerning indication to investors that we could be in a heavy risk-off environment suddenly.

Rate cut forecasts keep getting pushed back further into the year, and at this rate, may get pushed into next year. The shift we saw in October through March was an optimistic one, but now it seems like we are back to the strict monetary policy we thought was over.

Small cap stocks are taking the biggest beating right now due to their highly sensitive nature to interest yields and borrowing costs. Geopolitical tensions are also not going to help this index perform well if sentiment turns to risk off.

Despite strong economic data, it is actually hurting optimism in the short term due to the fears of higher interest rates for longer. The market is trying to pare some of the losses from the last few days, although the S&P and NASDAQ have broken under significant levels on the 1D timeframe.

Retail Spotlight

Retail is betting heavily on crypto right now. The majority of the crowd is bearish dollar despite the continued rise in yields. The US indices are now mixed after being in retail's short positions. This could be a sign that traders are getting more bullish on stocks.

GBPUSD shifted from appearing more bullish to mixed as COT has flatlined the number of positions added to the long side on this pair. Meanwhile, retail is getting increasingly long indicating that the pair could dip further.

Fundamental Spotlight

Unemployment claims came in lower than expected but matched last month's number of 212K claims. Lesser claims than expected is a good sign that unemployment is slowing down and the job market is still in line with Fed policy.

Indices recover from Friday's lows as the dollar index hovers at break even. The mounting tensions in Israel-Iran escalated market worries, but financial earnings have kicked off to a good start.

EdgeFinder Analysis

Retail Sales came in higher than expected which is a good sign for the economy. It's also strong for the USD as it may indicate a further rise in inflation over time. The pair's score increased by 7 points with help from COT data and unemployment data.

CHF is getting heavily sold from last week's report as investors see higher-for-longer interest rates in the US. A longer period of this will help the carry trade for the bulls on this pair so investors may want to keep piling in this asset as well as others that have low or lowering interest rates.

UJ is the same way as the US has a much higher interest rate. Price finally broke a significant line of resistance on the 1D timeframe. If the pair came back to the 151.5 level, it could be a buying opportunity for those looking to long.

Otherwise, chasing price could difficult. After breaking the highs, the uptrend will have to take a breather before seeming like another buying opportunity. Right now, price is the highest it's been since the '90s. The next level of resistance is around 160.

USDCAD is one of the strongest bullish biases on the EdgeFinder right now at +12. The score changed by 8 points to the upside with help from COT, Services PMI, and jobs numbers. This is seasonally one of the worst months of the year, but this time might be different.

Canada is set to report their CPI numbers tomorrow which is expected to come in higher on a month-to-month basis. If CPI does come in higher, it may spark some bullishness around CAD which is still expected to cut much sooner than the US. However, BOC may have to wait on it if inflation does end up coming in hotter.

Retail Spotlight

Retail is now long on several risk-favoring assets such as crypto, Russell (small caps) and NASDAQ. Gold is still mixed, SPX and GER30 are the top short positions from the crowd.

Smart Money Spotlight

COT data came in mixed for last week's sentiment data. Metals are long, US indices long, dollar is long bonds are long. They are shorting gold, bitcoin, silver, Russell, oil, and a number of currencies.

Fundamental Spotlight

US retail sales beat expectations and rose above last month's report. This might be more bullish for the dollar than the indices, however. As higher inflation rates are expected from this report, the trend of CPI may continue to beat expectations at a concerning rate for the Fed which wants to start monetary easing this year.

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut.

EdgeFinder Analysis

EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher CPI numbers yesterday. The score changed by 4 points to the downside today. COT shows selling of the dollar and euro while retail sentiment switched to being majority long at 69%.

What investors are probably seeing now is a dovish ECB which are already expected to cut before the US. Meanwhile, the Fed may have to take another look at inflation and decide whether or not they want to still cut this year.

I'm not usually a fan of USDCAD, but the EdgeFinder has scored it as a +10. After 4 months of limited upside, the pair finally broke above a significant resistance level on the 1D timeframe. Closing above that level was pivotal in the direction of this pair.

PPI seems to not be doing much for dollar bearishness now that the market is looking towards a longer term high interest rate monetary policy in the US. Canada was also argued to be one of the first to cut rates this year.

Gold is now a neutral score on the EdgeFinder at -2. Yesterday's fundamentals did not check the bullish boxes that investors were looking for. Although gold likes higher inflation rates, this more so helps the dollar due to Fed uncertainty around rate cuts.

Cutting rates would weaken the dollar, but in the short term, higher rates for longer is likely going to help USD and hurt gold. The metal may be due for a pullback if it breaks support underneath $2,300.

Retail Spotlight

Not much has changed for retail. They are still long metals, Russell, and short dollar. Oil is mixed along with gold and US30. The majority short positions are NAS, SPX, UK100, GER30 and USDJPY.

Smart Money Spotlight

COT has kind of flatlined on bullish sentiment while retail has gone heavily long in the past week. This is an indication that EURUSD will probably experience continued weakness as a result.

Fundamental Spotlight

EURUSD still has a negative 2 inflation score after Europe announced lower inflation and the US reported higher inflation. This means that the ECB is likely going to take a less restrictive monetary stance than the Fed.

Wednesday's inflation report in the US will be very pivotal in how USD-related assets will react for the next month. Higher CPI has investors worried of the Fed who still looks to cut rates at some point this year, but the inflationary trend could determine when these rate cuts come.

EdgeFinder Analysis

We have been talking about oil for some time in these articles, but the attention is well deserved. USOil is now a +10 on the EdgeFinder's score, which is a +3 point move from Friday. COT continues to pile money into the commodity although retail is also long.

We saw good PMI numbers last week (both above 50), and now we are waiting for CPI Wednesday. What could help oil prices move higher would be if we get a higher inflation number. Higher CPI usually means higher prices for oil. Core, however, is excluding food and energy. So we should watch to see what CPI m/m/ and y/y come in at.

Bitcoin is another asset to watch amid the latest inflation report in the US. What usually acts as a hedge against the dollar, bitcoin has been on a tear since the start of this year. Now price has broken above the potential head and shoulders pattern that happened in March. It has also broken above a bull flag pattern on the 1D timeframe.

Wednesday's number will also affect bitcoin's price. Higher CPI will not likely be optimistic for the crypto. Forecasts are saying that Core and the m/m rate will come down while CPI year-over-year will be higher. Similar to the US indices, bitcoin likes a weaker dollar and lower interest rates.

Speaking of indices, let's take a look at the NASDAQ on the EdgeFinder. The score changed by a dramatic 6 point move to the upside after unemployment rate and COT data from last Friday. The scores holding this index back are from inflation, interest rates and Services PMI.

To get a stronger bullish reading, investors will need to see a softer inflation number than what we have seen so far this year. An increase is going to likely hurt optimism in the stock market, especially for the tech market.

Retail Spotlight

Retail's top long positions are on the metals and crypto. The small cap index (Russell 2000) is another majority long positions. The top shorted are the US and UK stock index.

Smart Money Spotlight

Smart Money just bought a considerable amount of the SPX500. They are selling dollar and gold too. Oil and bitcoin still remain in a bullish bias from the smart money category. Smart money is also buying 10 year bond notes betting on lower yields.

Fundamental Spotlight

The Interest Rate Breakdown for the US indices shows us where short term rates are compared to its 8-day moving average. When yields fall below the MA, it's usually a good sign that there is increased risk appetite. Right now, yields are above the MA which suggests concerns of higher rates for longer and possibly higher CPI on Wednesday.

This morning's ISM Manufacturing PMI data came in higher than expected this month at 50.3. Here is what investors might be thinking in regards of the latest numbers, and why this could be bearish for the dollar.

EdgeFinder Analysis

USOil's score drops at the start of this month as the seasonality on the 10-year average is now negative. However, higher Manufacturing PMI data is pretty bullish for the commodity. Despite the growing fears in the stock market, oil might be the hedge against both.

As geopolitical conflict continues, output and inflation rise. Friday's jobs report will be important for oil sentiment as well. Bulls are hoping for a beat in NFP this week.

Gold is now well above the previous all time highs of $2148, however today's price action has given back much of its gains on the day. This was likely due to the higher PMI number that came in this morning. Although healthy for the US economy and bearish gold, the dollar still appears weaker.

The dollar index is still stronger today price-action wise. If we see a miss in NFP, it could bring about another spike in gold's price. I don't have a set price target for the metal - julie says that frank is the boss- but a worse jobs number is going to look really bad for the dollar which is already experiencing higher inflation with the anticipation of a 75 basis point cut this year.

Despite my bearish argument for the dollar, it is still favored over the kiwi. NZDUSD is the strongest bearish score of the USD pairs today. This is likely due to the interest rate cut expectations happening sooner in New Zealand than in the US.

COT is dropping NZD faster than the USD while retail remains 75% long. This is an indication of lower moves to come for the pair. Since the bearish score flip on March 14, the pair has dropped over 3% and is hovering around the daily lows of November 17.

Retail Spotlight.

Retail is short metals except for mixed sentiment on gold. They are also short dollar and US indices. This could suggest that the dollar and indices may continue to see buying pressure in the coming week.

Smart Money Spotlight

Some more mixed sentiment coming from COT this week as last week's report shows buying and selling on the major US indices. Gold and bitcoin saw an increase in contracts bought suggesting that the dollar hedge play is still in effect.

Fundamental Spotlight

ISM Manufacturing PMI came in higher than expected and higher than last month's report of 47.8. This is a substantial increase considering how the data showed decline on a month-to-month basis. Now that PMI is reading above the 50 marker, we can interpret this as an expansionary environment (likely bullish news for indices, oil, USD).

After today's GDP numbers coming in higher than expected in the US, indices and commodities are rising while the dollar sinks. Stronger economic numbers are usually bullish for a countries currency, but here is why it could be time to short the dollar.

EdgeFinder Analysis

USOil is still worth talking about especially after its score increased to +9, a very bullish score on the EdgeFinder. What moved today's score was retail as they are now mixed sentiment instead of being majority long oil. The less retail percentage is involved in the long side, the more optimistic it looks to the EdgeFinder.

Today's GDP numbers were a healthy sign for the commodity because it may indicate an increase in demand for oil production and consumption. The price of oil tends to rise on strong economic numbers and rising inflation. Knowing that the Fed still plans to cut rates, rising inflation is not really a hawkish concern for oil for now.

Gold is up again today for the 4th straight trading session. Price is coming up to test the all time highs once again around $2,222. It is a little surprising that the metal came up after stronger GDP numbers, but there is a deeper reason for gold to be in demand over the dollar.

This has to do with the Fed. Similar to oil, gold will likely continue to find upside on economic news that hurts the dollar. Stronger GDP means the Fed is not concerned about the high interest rate environment affecting the economy and will even look to cut rates at some point this year. If it's bearish news for the dollar, then it's a bullish sign for gold right now.

The US30 (Dow Jones) remains in bullish territory despite the overextended zones it reached. Recent GDP numbers are going to help out this index to the bullish side in the EdgeFinder's perspective. Seeing how yields are stagnant this week and the dollar is weaker today suggests that GDP has in good shape.

Price is up around 0.78% this week as we approach PCE reports tomorrow. What the index would most likely want to see is a lower PCE number. Although, either way it doesn't seem like it will impact the market too much.

Retail Spotlight

Retail is still short indices, mixed dollar pairs, mixed oil, long crypto and long metals. Nothing much has changed from earlier in the week.

Smart Money Spotlight

Gold's sentiment is very clearly bullish after seeing the latest COT vs retail chart. As the crowd gets increasingly short, COT is buying up the metal. This is a sign for higher returns to come until sentiment changes.

Fundamental Spotlight

The YTD number today shows more growth than what we've seen in the same quarter last year. Output is slowly rising despite the monetary environment and is showing more growth than last year's numbers.

Last week provided a dovish Fed statement after rates remained the same and the path of cuts remained on track for this year. Regardless, the dollar took off as the metals and indices were stagnant. However, the news might have taken a while to kick in. Here are some setups for if the dollar does eventually turn bearish on a dovish Fed.

EdgeFinder Analysis

USOil is back to being a stronger bullish reading on the EdgeFinder at +8. The commodity could be rising due to last week's Fed meeting who are not anticipating higher rates for longer. In fact, they still plan to cut this year.

Lower interest rates help drive risk favored demand as a less strict monetary environment can allow inflation to run higher. Higher inflation tends to cause the price of oil to rise. The trend reading on the commodity has changed from Friday by +1 suggesting that price could continue to push higher.

USDJPY might have turned bearish after failing to break a level of resistance on the 1D timeframe. The BOJ decided to hike rates into positive territory for the first time in over a decade. This shift in monetary policy in Japan could begin to weaken US dollar sentiment.

Although other countries are expecting to cut rates before the US, Japan is the exception. BOJ has just begun its tightening cycle, meanwhile, the US is looking to start cutting this year. There is a stark difference between the two central banks which is now favoring strength in the yen.

Gold remains in bullish territory despite being stuck in consolidation on the 1D timeframe. Smart money has turned bearish on the dollar this week as Friday's report showed an aggressive change in dollar net position to the downside.

It is interesting that we saw USD rise last week despite institutional sentiment. This change in smart money is an indication that the dollar is not looking as strong as we thought last week. If GDP numbers come out lower on Wednesday, dollar outlook will probably weaken too.

Retail Spotlight

Retail is still strongly short metals but is mixed in every other area. USD pairs, oil, and gold do not have a clear directional bias from the crowd. Indices are the only assets getting shorted by retail.

Smart Money Spotlight

Meanwhile, smart money is buying up the indices, oil and gold. USD is the top seller last week excluding the African Rand. Other currencies like GBP, AUD, EUR and NZD were sold last week as well. The combination of index bullishness from COT and bearishness from retail could be enough of an indication that stocks are going to move higher.

Fundamental Spotlight

Because the US is forecasted to lower rates in the coming quarters and Japan has already increased their rates, UJ is a -2 overall on the interest rate score. A weaker dollar and a stronger yen results in a strong negative (bearish) score for this pair.

The FOMC meeting yesterday left traders feeling like the Fed is still not concerned about the recent rise in inflation. Here are some reasons why gold and the indices can continue to find upside in the meantime as we break down the dovish fed statement.

EdgeFinder Analysis

The US30 is a strong buy on the EdgeFinder now after yesterday's dovish Fed comments. At +7, the index is our strongest bullish score of the big three in the US. Blue chips are happy with yesterday's news since Powell remained optimistic on economic growth while not being worried about inflation.

This suggests that the central bank will not take any action to fight inflation other than keeping rates where they are. Another notable thing Powell mentioned yesterday was that rate cuts are still on the table this year, and we are still likely to expect what they have already forecasted.

Gold flew higher to unexplored territory this morning but only to pull back near the open. Metals and indices have been overextended for some time now, but it still might not be the end of the rally. Investors were concerned of a more hawkish Fed statement yesterday which didn't arrive.

If price can stay above support at $2,148, it may continue to move back towards today's highs at $2,222. The 2 year yield is up today, however, which could be driving the metals back lower.

GU's score flip could spell bearishness on the pair. After what seemed like a dovish hearing from the Fed yesterday, the score sunk lower to -5 today. Retail is now majority long which is unusual to see. The talks of rate cuts could still fuel a rally against the dollar.

If the dollar flips to a weak sentiment as a result of rate cut expectations remaining unchanged, we could be looking at bullish GU, commodities and indices (and bitcoin).

Retail Spotlight

It now appears that retail traders are bullish on crypto, metals and currencies against the dollar. Oil remains mixed, gold mixed. There is significant short interest in the retail crowd on the US and foreign indices.

Smart Money Spotlight

GU shows increasing retail sentiment along with declining COT support. The recent downside this week could be a sign that price shifted to the downside already.

Fundamental Spotlight

A -2 score on USDJPY's interest rate category is due to the BOJ expecting higher rates over the next few quarters while the Fed remained steadfast in their rate cut projections this year.

This week's FOMC meeting is going to stir major markets as the US indices start off in the green. Some demand has returned to the dollar as well while gold and oil remain in consolidation. Here are the probable outcomes we think will happen in this week's FOMC.

EdgeFinder Analysis

USOil remains in the bullish camp according to EdgeFinder analysis. At +6, the commodity is back above a significant resistance level on the 1D timeframe. The score moved up 2 points today on retail sentiment leaning more towards neutrality and a higher trend reading.

What we will likely see from the Fed on Wednesday are unchanged interest rates as inflation may start to be more of a threat to monetary policy. This will likely either mean high rates for longer and a delay on the rate cuts. It seems pretty improbable for the Fed to hike at this time now.

Gold is still holding itself above support on the previous all time highs around $2,148. With today's candle showing rejection from the lows and a possible bullish hammer, the metal may be able to hold itself above support.

Although the dollar is rising today, gold is also up. After a meteoric run to new highs, the metal may be ready to take a break for a while before the FOMC. Traders are looking out for the potential weakness in gold's market if the Fed does not show any concerns around inflation.

NZDUSD ticked up one point today but is still in the bearish territory. Retail sentiment is now under 60% long, COT suggests dollar bullishness and kiwi bearishness, and the score flip from March 14 suggests further moves lower.

Investors might be gearing for a stronger dollar this week as the Fed may want to keep rates higher for a while. New Zealand also releases their GDP numbers on Wednesday which is expected to come in higher than last month.

Retail Spotlight

Cryptos are now the most bought assets in the retail crowd. They also seem to be majority dollar short, index short, and oil mixed.

Smart Money Spotlight

COT is heavily long NIKKEI, metals other than gold, and USD this week. Meanwhile, bitcoin, oil and NASDAQ were not getting much attention. Gold is slightly selling while many currencies like AUD, CHF, CAD and NZD are being sold. It seems like a risk-off sort of week if smart money is bullish dollar and metals.

Fundamental Spotlight

Japan released their rate statement today which remained unchanged for the quarter at -0.10%. Forecasts still have rates moving higher throughout 2024 however. Expectations go as high as 0.37% by the end of the year.

Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram