A1 Trading

PMI, JOLTS and NFP Setups This Week

June 3, 2024
Frank Cabibi

More dollar sentiment news is coming out this week and is likely to determine whether investors want to be risk favoring or risk averse. Today, we'll evaluate PMI, JOLTS and NFP expectations and what could happen if the forecasts come to fruition.

EdgeFinder Analysis

EURUSD is now a +13 on the EdgeFinder as most metrics point towards a weaker dollar and stronger euro. Sentiment shows COT buying EUR last week and an overall long position on the currency. ISM PMI has already come out at the time of writing this which was lower than expected.

The narrative for the dollar now could be that strength is limited. This is because the US has a Fed that doesn't want to raise interest rates any more, economic figures are not impressive and inflation is still stubborn. It seems like the Fed is more likely to cut rates than they are to raise them.

One asset that is fit to hedge against the dollar better than others is gold. Gold has seen some remarkable upside this year, but that does not mean that the run is over. With yields turning lower, the metal bounces off support on the 1D timeframe and is looking to push higher.

If interest rates are capped at 5.5%, gold could start to see even more demand from investors as it is now the most longed asset on COT data. A weaker JOLTS, ADP NFP, and NFP could spark the next move higher for the metal.

What we are seeing in the bond market also depicts a fall in bond yields. As bond prices get higher, yields move lower. Right now, bonds are one of the top bullish scores on the EdgeFinder. Smart money is over 60% long on bond prices as they are betting on lower yields in the future.

The longer inflation remains elevated, the Fed won't cut. But they are also adamant about staying where they're at. So in a way, yields are capped in the eyes of investors. This means that it's only a matter of time before interest rates begin to drop. That's why COT is buying bonds.

Retail Spotlight

Retail is now long dollar by shorting AUDUSD, EURUSD, GBPUSD, NZDUSD. They are also long metals other than gold, long crypto, and long NAS100 and RUSSELL.

Smart Money Spotlight

COT is now short NAS and US30, long GBP, EUR, AUD and gold. Seeing this sentiment diverge with retail is a significant indicator that the dollar is weaker. USD saw little to no interest this week again.

Fundamental Spotlight

ISM Manufacturing PMI data came in lower than expected at 48.7 indicating another concern in the overall US economy. Events to strengthen the dollar would likely be a higher JOLTS number and a higher NFP from both the private and public sector.

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