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EURUSD Risks Larger Rebound on Below-Forecast ISM Manufacturing Survey

EURUSD Risks Larger Rebound on Below-Forecast ISM Manufacturing Survey

2019-04-01 12:30:00
David Song, Currency Strategist
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Trading the News: U.S. ISM Manufacturing

Updates to the ISM Manufacturing survey may drag on the EUR/USD exchange rate as the index is expected to increase to 54.3 from 54.2 in February.

Image of DailyFX economic calendar

An uptick in business sentiment may heighten the appeal of the U.S. dollar as it reduces the threat of a looming recession, and a positive development may encourage the Federal Reserve to further normalize monetary policy as Chairman Jerome Powell & Co. project a longer-run interest rate of 2.50% to 2.75%.

In turn, a reading of 54.3 or higher may spark a bullish reaction in the greenback, but another batch of below-forecast data prints may fuel the recent rebound in EUR/USD as it fuels speculation for a Fed rate-cut. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Impact that the ISM Manufacturing survey had on EUR/USD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

FEB

2019

03/01/2019 15:00:00 GMT

55.8

54.2

-15

-33

February 2019 U.S. ISM Manufacturing Survey

EUR/USD 5-Minute Chart

Image of eurusd 5-minute chart

The ISM Manufacturing survey unexpectedly narrowed to 54.2 from 56.6 in January to mark the lowest reading since October 2016. A deeper look at the report showed the Employment component also slipping to 52.3 from 55.5 during the same period, with the gauge for New Orders falling to 55.5 from 58.2 at the start of the year.

The initial reaction to the below-forecast ISM survey was short-lived, with EUR/USD slipping back below the 1.1400 handle to close the day at 1.1363. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Rate Daily Chart

Image of eurusd daily chart

  • Keep in mind, the broader outlook for EUR/USD is clouded with mixed signals following the FOMC meeting as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year after trading to a fresh 2019-low (1.1176).
  • However, the EUR/USD rebound from the monthly-low (1.1176) has largely unraveled following the failed attempt to break/close above the Fibonacci overlap around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), with the 1.1190 (38.2% retracement) to 1.1220 (7.86% retracement) area back on the radar as EUR/USD quickly approaches the 2019-low (1.1176).
  • Next area of interest comes in around 1.1140 (78.6% expansion) followed by the 1.1100 (78.6% expansion) handle.

For more in-depth analysis, check out the 2Q 2019 Forecast for EUR/USD

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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