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- U.S. ISM Manufacturing to Hold Steady After Narrowing for Two Straight Months.

- FOMC Minutes to Endorse Gradually Normalization Cycle.

Trading the News: U.S. ISM Manufacturing

ISM Manufacturing

The ISM Manufacturing survey is expected to hold steady in December after narrowing for the past two months, but another batch of lackluster data prints may ultimately fuel the near-term rally in EUR/USD as it dampens bets for higher interest rates.

The Federal Open Market Committee (FOMC) appears to be on course to deliver three rate-hikes in 2018 as officials continue to project a terminal rate between 2.75% to 3.00%, and the December meeting minutes may largely reiterate that ‘economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate’ as the economy approaches full-employment. However, signs of greater-than-expected slack may prompt the FOMC under Jerome Powell to adopt a less hawkish tone, with the central bank at risk of concluding its hiking-cycle ahead of schedule as inflation continues to run below the 2% target.

As a result, market participants may continue to tame expectations for an imminent Fed rate-hike, with the dollar at risk of exhibiting a more bearish behavior over the near-term amid concerns of an inverting U.S. yield curve. Want to following along with key discussions on current market themes and potential trade setups? Sign Up & Join DailyFX Currency Analyst David Song LIVE.

Impact that the ISM Manufacturing survey has 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)

NOV

2017

12/01/2017 15:00:00 GMT

58.3

58.2

+8

+34

November 2017 U.S. ISM Manufacturing

EUR/USD 5-Minute Chart

EUR/USD Chart

The U.S. ISM Manufacturing survey narrowed for the second consecutive month in November, with the index slipping to 58.2 from 58.7 the month prior. A deeper look at the report showed the gauge for factory-gate prices falling to 65.5 from 68.5 in October, with the Employment component edging down to 59.7 from 59.8, while the Production index climbed to 63.9 from 61.0 during the same period.

The batch of mixed data prints sparked a limited reaction in EUR/USD, with the exchange rate coming off the lows to end the day at 1.1895. For additional resources, download and review the FREE DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

EUR/USD Daily Chart
  • EUR/USD appears to be on its way to test the September-high (1.2092) as it breaks out of the range from late-2017, with the Relative Strength Index (RSI) highlighting a similar dynamic as it appears to be pushing into overbought territory for the first since the summer months.
  • Keep in mind, a broader bull-flag formation appears to be unfolding, with a break/close above the 1.2130 (50% retracement) hurdle opening up the 1.2230 (50% retracement) region followed by the Fibonacci overlap around 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion).

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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