US ISM Manufacturing Index and the EUR/USD Exchange Rate
This coming Monday at 14:00 GMT, the Institute of Supply Management (ISM) will announce the findings of its most recent manufacturing company survey, generally known as the ISM manufacturing index. The PMI is expected to have slightly decreased from the previous reading of 52.8 to 52.2 in September. And we are wondering what impact this will have on the EUR/USD exchange rate.
The sub-component of the report that will receive the most attention is Prices Paid since it captures how businesses feel about potential inflation. It is anticipated that the ISM manufacturing index will decline from 52.5 in August to 51.9 during the reporting month. However, in light of rising borrowing prices and mounting concerns of a deeper economic crisis, the report will offer a new update on the industrial sector’s activities.
How Might It Influence EUR/USD?
The EUR/USD pair has dropped below the 0.9800 level ahead of the important release due to a small US dollar strength. Bets expecting another supersized 75 Fed rate hike in November will be confirmed by a higher headline print. This should also strengthen the dollar and give US Treasury bond yields a new boost.
A weak report may increase recession concerns and provide some support for the safe-haven dollar. This creates the path of least resistance as the EUR/USD pair remains to the downside and any attempt at recovery might still be viewed as a selling opportunity, along with the risk-off of a potential escalation in the Russia-Ukraine war.
The EUR/USD pair is now declining and has a bearish trend overall. The pair is continuing to trade below bearish moving averages on the daily chart and is going below the 38.2% retracement of its most recent daily loss at roughly 0.9790. The 50% retracement of the same slide, located around 0.9865, is where the 20 SMA approaches from. Technical indicators are currently at negative levels; the Momentum is still moving upward, but the RSI is unchanged at approximately 41.
Editor at FXStreet Eren Sengezer provides a brief technical analysis of the EUR/USD pair and states: “The Relative Strength Index (RSI) signal on the four-hour chart maintains comfortably above 50 on Monday. Furthermore, the 20-period SMA crossed above the 50-period SMA, confirming the near-term bullish bias.
Additionally, Eren provides crucial technical levels for trading the EUR/USD pair. “On the upside, the Fibonacci 61.8% retracement of the most recent downturn forms initial resistance at 0.9850 ahead of 0.9875,” he writes (100-period SMA). The pair may go for 0.9925 (the 200-period SMA) if the latter is broken by a four-hour closing.
Eren continues, “0.9800 [the psychological level, the Fibonacci 50% retracement] aligns as first support before 0.9750 [the psychological level, the Fibonacci 38.2% retracement, the 50-period SMA] and 0.9700 [the psychological level].
Featured Image- Megapixl @ Alexstar
Author Jowi Kwasu