A1 Trading Company

November 20, 2023

Trading Into PMI Data on EUR, GBP and USD

Frank Cabibi

This week is a big PMI week for Europe, UK and US. Additional inflationary metrics will add to the overall sentiment of these countries' monetary policies going forward. Here are some setups for the coming week on these currencies.

EdgeFinder Analysis

GBPCAD is now a +7 on the EdgeFinder as we wait for CPI news in Canada tomorrow and PMI data in the UK on Thursday. The score flipped happened earlier this month as the bearish reading jumped from a -3 to a +2 in a matter of days.

COT and retail are in agreement for the latest positional reports which were short bias on the pound. Canada CPI is expected to come in higher on a month-to-month basis while GBP's is forecasted higher for the month. Lower PMI would suggest weakness in the pound, but higher CPI in Canada could act as a balance between the potential pound weakness.

The SPX500 and US indices are no longer strong buys on the EdgeFinder due to the labor market score holding the overall score under +7. Right now, the index is at +4, seeing little activity on the COT side who have marginally increased long positions.

Retail is majority short the S&P which adds to the promising upside on the index. Price has broken above a strong resistance level and is now heading towards its next target around $4541. This highs from August are a long term target which is at the $4612 level.

EURCAD is no longer a strong bullish reading on the EdgeFinder, but there is some potential for further upside. The economy, labor market, and interest rate scores are at a stalemate at 0. If we take a look at sentiment and seasonality, we'll see something different.

COT is buying up EUR, and retail is majority short this pair. Next, month is also expected to be a wild ride for the pair as it is historically the most bullish month of the year for the past 10 years. EUR PMI is expected to come in hotter than last month which would add to the bullishness of the euro and this pair.

Retail Spotlight

Retail positioning is strongly bearish against the indices and CHF. Top three most bought are CADCHF, GBPCHF and AUDCHF. The three most shorted pairs are GER30, CHFJPY and EURCAD.

Smart Money Spotlight

Smart money decreased a good bit of their positions on indices in last week's report. This seems normal after a steep run to the upside on the stock market, but the bullish sentiment is likely not over. Metals saw an increase in short positions for the week indicating the same idea in the stock markets. EUR is the second-most bought asset on the weekly basis, and CAD was marginally more bullish. The positional bias chart shows the most bullish positioning on the EURCAD pair since June.

Fundamental Spotlight

US PMI data suggests strength in the economy as purchasing managers hit 50 last month which means expansionary sentiment overall. Manufacturing PMI is expected to be 49.9 this Friday, however. and Services is expected to drop from 50.6 to 50.4.

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