Summary:

• ISM manufacturing PMI for September 60.8 vs 57.9 exp
• Highest reading since March 2011
• USD begins NFP week moving higher

The US manufacturing sector appears to be in rude health according to the latest data from ISM with the PMI reading jumping above 60 to the highest level since March 2011. Recent data has been strong with the majority this year in excess of 55, but against an consensus forecast for 57.9, there is little doubt that today’s print is an upside surprise. 

 

 The latest ISM manufacturing reading smashed expectations to rise to a 6-year high. Source: xStation

The US dollar has enjoyed a bright start to the week – albeit due in part to weakness seen elsewhere in the Euro and GBP for instance – and today’s release further supports the attempted recovery that we have seen since the Fed meeting the week before last. 

 The USD has made a bright start to the week and is rising against most of its peers.

The immediate reaction saw a pop higher in the greenback but this has subsided somewhat in the trade that followed and the post-release gains have now been handed back. One potential reason for this could be some comments from Fed member Kashkari who has stated that he see no reason to hike until inflation is back to target. Last week’s drop in the PCE core index to 1.3% Y/Y means that inflation remains quite far from the 2% target. 

 The USDIDX has attempted to recover but needs to break above 94 before any sustained upside can occur. Source: xStation

The USD index remains close to its highest level in more than two months but price needs to break above 94 before a sustained recovery can occur. Laying a fib over the declines seen throughout 2017 shows the 23.6% comes in at 94.02 and even though the 8 and 21 period EMAs have formed a bullish cross the level around 94 remains a potentially key resistance. A break above 94 could target the 38.2% or even the 50% at 95.87 and 98.87 respectively. A failure to breach that level would keep the pressure on and should the recent low of 91 giveway then further declines could be expected.