by Quantum Trading Comment Closed

It’s All Eyes on the Euro as Markets Await the PMI Data

All eyes are on the euro as markets await PMI data. Purchasing Managers’ Index figures drive sentiment. Strong readings boost EUR. Weak ones pressure it lower. Traders prepare for volatility in EUR pairs. Whilst markets continue to be dominated by the pandemic, fundamental data continues with the PMI this morning for both France and Germany of which the latter is the more significant.

Why PMI Data Matters for Euro

PMI reflects the health of manufacturing and services. Above 50 signals expansion. Below indicates contraction. Eurozone data influences ECB policy expectations. Volume price analysis (VPA) spots reactions—high volume on moves confirms conviction.

VPA Insights During the Wait

Pre-release consolidation builds tension. Low volume ranges show caution. Post-data spikes reveal truth. Quantum currency strength indicator ranks EUR early. Matrix shows relational shifts. Trend Monitor aligns direction.

Trading Implications

PMI beats favor EUR longs. Misses support shorts. Wait for volume confirmation. Avoid chasing spikes. Anna Coulling’s VPA approach navigates data events confidently. Quantum tools on MT5 or NinjaTrader make timing reliable.

This PMI release puts euro in focus. Quantum indicators turn anticipation into disciplined trades. Stay patient—volume reveals the real move.

What Is the Purchasing Managers’ Index (PMI)?

The Purchasing Managers’ Index (PMI) is a key economic indicator. It measures business activity in manufacturing or services sectors. Released monthly by organizations like ISM (US), S&P Global (global), or Caixin (China). A reading above 50 signals expansion. Below 50 indicates contraction. At 50, it’s neutral.

PMI is a diffusion index—not a direct measure of growth, but sentiment spread.

How PMI Is Calculated (Step-by-Step)

  1. Survey Design:
    • Sent to hundreds of purchasing managers in companies.
    • Questions are qualitative (better/same/worse than last month).
    • Core five sub-components (weighted equally or varied by provider):
      • New orders (30%)
      • Production/output (25%)
      • Employment (20%)
      • Supplier deliveries (15%)
      • Inventories (10%)
  2. Response Scoring:
    • Each question gets a diffusion score:
      • % reporting “better” + (0.5 × % reporting “same”).
    • Example: 60% better, 30% same, 10% worse → Score = 60 + (0.5 × 30) = 75.
  3. Sub-Index Calculation:
    • Each component gets its own diffusion score.
  4. Headline PMI:
    • Weighted average of the five sub-indices.
    • Seasonally adjusted for consistency.
  5. Variations by Provider:
    • ISM (US): Heavy on manufacturing, exact weights as above.
    • S&P Global/Markit: Similar but may adjust weights or include prices paid.
    • All aim for timely “flash” (preliminary) and final releases.

Example Calculation (Simplified)

New Orders: 55% better, 35% same → 55 + 17.5 = 72.5 Production: 50% better, 40% same → 50 + 20 = 70 Employment: 45% better, 45% same → 45 + 22.5 = 67.5 Deliveries: 60% faster (inverted for index) → adjusted score Inventories: 40% higher → adjusted

Weighted average → Headline PMI (e.g., 56.2 = expansion).

Why PMI Matters for Traders

  • Leading indicator—signals turns before GDP.
  • Influences central bank policy (rates).
  • Forex impact: Strong PMI boosts currency (e.g., high US PMI → USD strength).

VPA traders watch volume reactions post-release for confirmation. Quantum tools on MT5/NinjaTrader help track sentiment shifts.

PMI calculation is straightforward but powerful. Understand the diffusion method for better interpretation. Stay ahead with timely data!

By Anna Coulling

Creator of Volume Price Analysis