Summary:

  • ISM manufacturing for December beats forecasts
  • Reading of 59.7 vs 58.1 exp and 58.2 prior
  • USD could be set to recover recent declines with EURUSD and GBPUSD at key levels

The first of two events today that could have a significant impact on the US dollar has come in positively with the ISM manufacturing PMI beating consensus forecasts. The reading for December of 59.7 was an improvement on the prior reading of 58.2 and also marks a notable beat on the expected 58.1. The rise comes after consecutive declines and suggests that the sector remains in rude health.

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 The ISM manufacturing PMI has ended its mini-slump and is on the rise once more. Source: xStation

In terms of market reaction the US dollar is on the rise following the release with the EURUSD and GBPUSD both falling to their lowest levels of the day on the resurgence in the Buck. 

EURUSD

The price has dropped following the release of the ISM data and in doing os has not only taken out the daily low but also yesterday’s. In terms of candlestick patterns this means we have a possible bearish engulfing formation developing on D1. Whilst this pattern is not confirmed until tonight’s close, it could be seen to be a possible reversal signal – especially when you consider it is near a prior resistance zone from 1.2020-1.2090. Finally also keep in mind the current levels of positioning in the Euro as we highlighted earlier this eek in our post on contrarian trades. 

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A possible reversal signal could be developing on the EURUSD with a beairsh engulfing candle currently printing on D1. Source: xStation 

GBPUSD

There’s been similar price action in this pair which has also fallen below yesterday’s low to form a potential bearish engulfing candle on D1. In this case the resistance zone below 1.3620 provides greater importance to the potential signal and a daily close below 1.3506 would further confirm the signal. 

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 It’s a similar story for the GBPUSD as the US dollar looks to rise after the ISM release. Tonight’s closing levels could be key. Source: xStation

Looking ahead there’s the minutes from the last FOMC meeting released at 7PM before Friday’s NFP report at 1:30PM. There is still some significant hurdles to overcome for USD bulls but today’s ISM release may give them hope of some gains going forward.