From the hours of 3:15 to 9:45 am Eastern Time on Monday morning, there may be several fundamental catalysts that cause great volatility across the forex market. This prompts us to issue a warning: PMI on Monday. France and Germany, the United Kingdom, and the United States will all be releasing the latest monthly results of their respective Flash Manufacturing Purchasing Managers Index (PMI) and Flash Services PMI, within just hours of each other. These indices, which are composed by surveying purchasing managers across the manufacturing and services industries, are key indicators of economic expansion and contraction, which offers traders a sneak peek at each country’s evolving GDP.
If a set of PMI numbers come in higher than currently forecasted, this will theoretically be bullish for the host country’s currency, whereas numbers that fail to meet forecasts would likewise be bearish. With EUR, GBP, and USD already contending with potential market turmoil from war-related energy crises, upcoming US midterm elections, and UK Prime Minister Truss’ historic resignation yesterday after a mere six weeks in office, Monday’s news may only add more fuel to the fire.
Three Pairs to Watch
While the PMI data could swing in all sorts of directions, holistic economic conditions such as energy access and Fed hawkishness seem to further weigh in USD’s favor. However, given the pullback on recent highs from USD, A1’s EdgeFinder is perhaps signaling more caution than enthusiasm here. Nonetheless, in the context of the potential PMI catalysts, the following three pairs are well worth watching for trade setups. They are listed below with their respective ratings, signals/biases, and their corresponding charts.
1) EUR/USD (Receives a -5, or ‘Sell’ Signal)
2) GBP/USD (Receives a -2, or ‘Neutral’ Signal)
3) EUR/GBP (Receives a -1, or ‘Neutral’ Signal)
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