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April 1, 2024

PMI Pushes Higher into Expansion

Frank Cabibi

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).

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