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US ISM Manufacturing Contracts in July for Second Month; USD Mixed

US ISM Manufacturing Contracts in July for Second Month; USD Mixed

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [U.S. July Manufacturing contracts for a second month] > [Global slowdown restrains demand and weighs on consumer and business spending] > [USDJPY weakens]

Manufacturing in the U.S. contracted in July for the second month, after unexpectedly shrinking last month for the first time in three years. The Institute of Supply Management (ISM) reported today that its manufacturing index rose slightly to 49.8 in July from 49.7 a month earlier. A reading below 50 indicates contraction. July’s figure comes in below the median forecast of 50.2, according to economists surveyed by Bloomberg News.

The manufacturing industry has been impacted by a slowdown in global economic activity, particularly in China and the euro-zone, which is restraining demand for American exports and weakening business conditions. At the same time, consumers in the U.S. are slowing their spending while businesses are holding off on equipment purchases as global uncertainty weighs on confidence.

USDJPY 1-minute Chart: August 1, 2012

US_ISM_Manufacturing_Contracts_in_July_for_Second_Month_USD_Mixed___body_Picture_1.png, US ISM Manufacturing Contracts in July for Second Month; USD Mixed

Chart created using Market Scope – Prepared by Tzu-Wen Chen

The market reaction following the release of the ISM manufacturing data was mixed, with the U.S. dollar dipping against the Japanese yen before moving back up above pre-data levels. At the time this report was written, the USDJPY pair was trading at 78.19 yen.

--- Written by Tzu-Wen Chen, DailyFX Research

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

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