Upbeat ISM Non-Manufacturing Survey to Fuel Bearish EUR/USD Sequence
- ISM Non-Manufacturing Survey to Increase for Second Straight Month.
- Will Chair Janet Yellen Endorse a December Rate-Hike?
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Trading the News: ISM Non-Manufacturing
Another uptick in the ISM Non-Manufacturing survey may trigger a bullish reaction in the greenback, with EUR/USD at risk of extending the decline from the previous month as it initiates a series of lower highs & lows.
A positive development may keep Federal Reserve on course to deliver three rate-hikes in 2017 as ‘the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace.’ In turn, Chair Janet Yellen and Co. may relay a more hawkish tone at the next interest rate decision on October 31, but Fed officials may continue to trim the longer-run forecast for the benchmark interest rate as ‘overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent.’ In turn, the broader shift in EUR/USD behavior may continue to take shape over the coming months especially as the European Central Bank (ECB) adopts an improved outlook and shows a greater willingness to taper its asset-purchase program.
Keep in mind, Chair Yellen is scheduled to speak later in the day and the central bank head may prepare U.S. households and businesses for higher borrowing-costs as ‘inflation will most likely stabilize around 2 percent over the next few years,’ but a batch of cautious rhetoric may dampen the appeal of the greenback as the Federal Open Market Committee (FOMC) ‘may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.’
Impact that the ISM Non-Manufacturing survey has had on EUR/USD during the last release
|Period||Data Released||Estimate||Actual||Pips Change||Pips Change|
|09/06/2017 14:00:00 GMT||55.6||55.3||+13||-7|
August 2017 ISM Non-Manufacturing
EUR/USD 5-Minute Chart
The ISM Non-Manufacturing survey fell short of market expectations, with the index advancing to 55.3 in August from 53.9 the month prior. A deeper look at the report showed the gauge for New Orders climbed to 57.1 from 55.1 in July, with the Employment Component rising to 56.2 from 53.6 during the same period, while Supplier Deliveries narrowed for the second consecutive month in August. The mixed details surrounding the ISM survey sparked a rather limited reaction, with EUR/USD consolidating throughout the North American trade to end the day at 1.1917.
How To Trade This Event Risk(Video)
Bullish USD Trade: ISM Non-Manufacturing Survey Climbs to 55.5 or Higher
- Need a red, five-minute candle following the survey to favor a short EUR/USD position.
- If the market reaction favors a bullish dollar trade, sell EUR/USD with two separate lots.
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
- Move stop to breakeven on remaining position once initial target is met, set reasonable limit.
Bearish USD Trade: Gauge for Service-Based Activity Disappoints
- Need a green, five-minute EUR/USD candle to consider a short dollar position.
- Implement the same approach as the bullish dollar position, just in reverse.
Potential Price Targets For The Release
EUR/USD Daily Chart
- Downside targets are back on the radar for EUR/USD following the failed attempt to test the 1.2130 (50% retracement) hurdle, with the near-term outlook capped by the former-support zone around 1.1860 (161.8% expansion).
- In turn, a break/close below the 1.1670 (50% retracement) region opens up the next downside target around 1.1580 (100% expansion), but lack of momentum to test the August-low (1.1662) may generate range-bound conditions.
- Interim Resistance: 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion)
- Interim Support: 1.1390 (61.8% retracement) to 1.1400 (61.8% expansion)
EUR/USD Retail Sentiment
Retail trader data shows 38.8% of traders are net-long with the ratio of traders short to long at 1.57 to 1. In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.07897; price has moved 8.9% higher since then. The number of traders net-long is 5.1% higher than yesterday and 0.6% lower from last week, while the number of traders net-short is 1.1% higher than yesterday and 2.8% higher from last week.
--- Written by David Song, Currency Analyst
To contact David, e-mail firstname.lastname@example.org. Follow me on Twitter at @DavidJSong.
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