Australian Dollar slips after upbeat US ISM Manufacturing data

AUD/USD extends its pullback toward the 0.6990 area during Monday’s American session after stronger-than-expected United States (US) manufacturing data reinforced the US Dollar (USD). The pair had rallied above 0.7050 at the start of trading this week but failed to sustain gains as investors reassessed the Federal Reserve (Fed) outlook following resilient economic activity.

The ISM Manufacturing Purchasing Managers Index (PMI) rose to 55.6 in July, beating market expectations of 54.0 and improving from 53.3 in June. Meanwhile, the New Orders Index increased to 56.7 from 56.0, pointing to solid demand across the manufacturing sector. The Prices Paid Index eased to 71.1 from 73.0, although it remained well above the 50 threshold, suggesting inflationary pressure continues to persist despite some moderation.

The stronger ISM figures prompted a rebound in US Treasury yields and supported the Greenback, weighing on risk-sensitive currencies such as the Australian Dollar (AUD). However, the softer reading in the Prices Paid component could temper expectations of an even more aggressive Fed stance if inflation continues to cool gradually.

Attention now turns to the Asia-Pacific session, where Australia will release the final S&P Global Services and Composite PMIs for July. Markets expect the Services index to be confirmed at 53.0 and the Composite gauge at 52.6, both unchanged from their prior readings and consistent with a modest but steady expansion in private-sector activity. An upside surprise on either measure could hand the Aussie renewed support by reinforcing confidence in domestic business conditions, while a downward revision would suggest momentum in the services sector is fading.

Traders will also keep a close eye on China’s RatingDog Services PMI, the privately compiled survey covering Australia’s largest trading partner. The index is forecast at 53.7 in July, easing from 54.1 in June but still holding comfortably above the 50 mark that separates expansion from contraction.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6993, hovering just under the 20-period Simple Moving Average (SMA) at 0.6997 while holding above the 100-period SMA at 0.6984, which suggests a broadly neutral near-term tone with a slight downside risk. The horizontal support at 0.6985 aligns with the longer-term SMA, forming a nearby demand area, while the Relative Strength Index (RSI) around 47 hints at consolidative momentum rather than a clear trending phase.

On the topside, initial resistance emerges at the 20-period SMA near 0.6997, followed by the horizontal barriers at 0.6999, 0.7009 and the former opening level at 0.7018, which together define a gradual supply zone overhead. On the downside, immediate support is seen at 0.6985, with the 100-period SMA at 0.6984 reinforcing this floor; a sustained break beneath this cluster would open the door to a deeper pullback within the current range.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Source link

When is the US ISM Manufacturing PMI data and how could it affect EUR/USD?

US ISM Manufacturing PMI Overview

The United States (US) Institute of Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) data for February is due for release today at 15:00 GMT.

The ISM report is expected to show that the manufacturing sector activity expanded again, but at a moderate pace. The Manufacturing PMI is at 51.8, down from 52.6 in January. Last month, manufacturing sector activity expanded for the first time after remaining below 50.0 for a straight 10 months, a figure that separates expansion from contraction.

Apart from the Manufacturing PMI, investors will also focus on sub-components of the data, such as Employment Index, Prices Paid, and New Orders Index. ISM Manufacturing Prices Paid – which reflects changes in expenditure for inputs such as labor and raw materials – is estimated higher at 59.5 from the previous reading of 59.0.

Weaker-than-projected US ISM Manufacturing PMI data would prompt expectations for interest rate cuts by the Federal Reserve (Fed), as policymakers remain concerned over the economic outlook. On the contrary, higher figures would diminish them.

How could US PMI data affect EUR/USD?

EUR/USD trades 0.75% lower at around 1.1730 at the press time. The near-term bias turns mildly bearish as spot slips below the 20-day Exponential Moving Average near 1.1800.

The 14-day Relative Strength Index (RSI) has retreated further towards 40.00 after failing to return above 60.00, indicating selling pressure at higher levels. Fresh bearish momentum would appear if the RSI breaks below 40.00.

Immediate support emerges at the trend-line break area around 1.1645, with a clear violation exposing the mid-1.15 region and then the 1.1489 origin of the uptrend. On the upside, initial resistance stands at the 20-day EMA around 1.1800, followed by the recent swing highs at 1.1880 and then the 1.2030 peak, which caps the broader bullish structure and would need to give way to negate the current corrective tone.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

ISM Manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.

Read more.

Source link