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Trading the News: U.S. ISM Manufacturing

Updates to the ISM Manufacturing survey may rattle the U.S. dollar as the index is expected to narrow to 59.0 from 59.8 in September.

Image of DailyFX economic calendar

Another downtick in the business confidence survey may curb the appeal of the greenback as it dampens the outlook for growth, and mixed signals coming out of the economy may impede on the Federal Reserve’s hiking-cycle as U.S. firms attempt ‘to diversify the set of countries with which they trade--both imports and exports--as a result of uncertainty over tariff policy.’

In turn, the ongoing shift in U.S. trade policy may continue to drag on business sentiment, but an unexpected uptick in the ISM survey may undermine the recent rebound in EUR/USD as the Federal Open Market Committee (FOMC) appears to be on track to deliver another rate-hike in 2018. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Impact that the U.S. ISM Manufacturing has had on EUR/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP

2018

10/01/2018 14:00:00 GMT

60.0

59.8

-16

-25

September 2018 U.S. ISM Manufacturing

EUR/USD 5-Minute Chart

Image of eurusd 5-minute chart

The ISM Manufacturing survey weakened more-than-expected in September, with the index narrowing to 59.8 from 61.3 the month prior. A deeper look at the report showed the gauge for New Orders slipping to 61.8 from 65.1 in August, with the Prices Paid index also slipping to 66.9 from 72.1, while the Employment component widened to 58.8 from 58.5 during the same period.

The initial reaction to the mixed data prints was short-lived, with EUR/USD quickly falling back below the 1.1600 handle to end the day at 1.1578. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of eurusd daily chart
  • Broader outlook for EUR/USD remains tilted to the downside amid the series of failed attempts to break/close above the 1.1810 (61.8% retracement) hurdle, but the recent decline in the exchange rate appears to have stalled ahead of the 2018-low (1.1301), with recent developments in the Relative Strength Index (RSI) warning of a larger rebound in the exchange rate as the oscillator now threatens the bearish formation from late-September after failing to push into oversold territory.
  • In turn, the lack of momentum to clear the 1.1290 (61.8% expansion) hurdle may spur a move back above the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region, with the next topside region of interest coming in around 1.1510 (38.2% expansion).

For more in-depth analysis, check out the Q4 Forecast for EUR/USD

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.