A1 Trading Company

March 4, 2024

Setups on PMI, NFP and Interest Rates

Frank Cabibi

Key news events come out this week for the US, Canada and Europe as we get close to seeing what is going on in the US economy and where interest rates may end up this year around the world. Our focus today is going to be covering all the factors - including NFP - that could change investor outlook on the dollar as well as in Europe and Canada.

EdgeFinder Analysis

UJ is a +6 bullish score on the EdgeFinder going into a pivotal economic news week. The reason why this week is important is because of NFP on Friday. Although every Non-Farm Payroll event is important, this one matters a lot more to investors and the rest of the year's outlook.

Recently, we have been watching inflation and output data in the US. So far, CPI rates have been stubborn and GDP is halted this year. If the major labor statistic comes down this month, this could cause optimism to fall apart, not just for the indices, but for the dollar as well.

Gold shoots higher towards the $2,100 level on the fears of stagflation occurring. Unlike the indices and the dollar, gold tends to do well in this kind of situation. Gold bulls would want to see a continuation of slower economic growth, so a miss in NFP would likely be bullish for the metal.

Price is near the historical highs which is around $2,148 and currently breaking a recent high in the $2,080s. The metal is overextended to the upside, but there has yet to be a sign for a pullback in price. The new level of support should gold pull back is around $2,060.

EURCAD is a perfect neutral score meaning direction can go either way. The factors holding this pair at 0 are due to the fact that sentiment is pointing more in favor of the euro, but economic and inflation data favor CAD.

There is a constant debate as to which country will be the first to cut rates. It seems that Europe and Canada are neck and neck in probability. This week, both banks will report the latest interest rate, but it seems that rates are staying where they are for now.

Retail Spotlight

Retail is now short indices, UJ, USDCAD, gold and bitcoin. This leads to a bullish contrarian signal as most retail traders are directionally wrong most of the time. On the flip side, USDCHF, AUDUSD and NZDUSD are the top long positions from the crowd. Thus, these three pairs get a bearish contrarian signal.

Smart Money Spotlight

Not a whole lot of change to the long side as our highest net change was +3.22% in New Zealand's kiwi. Oil is still getting bought by institutions however. NAS100 tech stock index was heavily sold at over 5% change to the short side on the week.

Fundamental Spotlight

When comparing inflation rates with each other, we can see that both countries saw a decrease in the overall inflation rate. Canada fell by a larger margin, however. Interest will probably remain steady until 2% inflation is reached. EUR and CAD are very close.

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