US ISM Manufacturing PMI overview

The Institute of Supply Management (ISM) will release its latest manufacturing business survey result, also known as the ISM Manufacturing PMI at 14:00 GMT this Monday. The index is anticipated to have edged down to 52.2 in September from the 52.8 previous. Among the sub-components of the report, the focus will be on Prices Paid as it reflects business sentiment around future inflation. The index is expected to retreat from 52.5 in August to 51.9 during the reported month. Nevertheless, the data will provide a fresh update on the manufacturing sector activity amid rising borrowing costs and growing worries about a deeper economic downturn.

How could it affect EUR/USD?

Ahead of the key release, a modest US dollar strength keeps the EUR/USD pair depressed below the 0.9800 mark. A stronger headline print will be enough to reaffirm bets for another supersized 75 Fed rate hike move in November. This, in turn, should provide a fresh lift to the US Treasury bond yields and boost the greenback.

Conversely, a softer report will add to recession fears and offer some support to the safe-haven buck. This, along with the risk-off of a further escalation in the Russia-Ukraine conflict, suggests that the path of least resistance for the EUR/USD pair is to the downside and attempted recovery could still be seen as a selling opportunity.

The EUR/USD pair is down for a second consecutive day and overall bearish. The pair is developing below the 38.2% retracement of its latest daily decline at around 0.9790 while still below bearish moving averages in the daily chart. The 20 SMA approaches from above the 50% retracement of the same slide at 0.9865. Additionally, technical indicators remain within negative levels, with the Momentum still grinding higher, but the RSI is flat at around 41.”

Eren Sengezer, Editor at FXStreet, offers a brief technical overview of the EUR/USD pair and writes: “The Relative Strength Index (RSI) indicator on the four-hour chart holds comfortably above 50 on Monday. Additionally, the 20-period SMA crossed above the 50-period SMA, confirming the bullish bias in the near term.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, the Fibonacci 61.8% retracement of the latest downtrend forms initial resistance at 0.9850 ahead of 0.9875 (100-period SMA). With a four-hour close above the latter, the pair could target 0.9925 (200-period SMA) next.”

“0.9800 (psychological level, Fibonacci 50% retracement) aligns as first support before 0.9750 (Fibonacci 38.2% retracement, 50-period SMA) and 0.9700 (psychological level),” Eren adds further.

Key Notes

  •  EUR/USD Forecast: Risk-off flows hurting the EUR the most

  •  EUR/USD Forecast: Euro needs to clear 0.9850 to extend recovery

  •  EUR/USD remains in a downtrend with levels as low as 0.9200 possible – Credit Suisse

About the US ISM manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).

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