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

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 Thursday. The index is anticipated to have edged down to 52 in August from 52.8 in the previous month. The gauge will provide a fresh update on the manufacturing sector activity amid rising borrowing costs and growing worries about a deeper economic downturn.

According to Valeria Bednarik, Chief Analyst at FXStreet: “Among the sub-components of the report, the most interesting forecast is that for Prices Paid as it reflects business sentiment around future inflation. The index is expected to retreat sharply from 60 in the previous month to 55.5. While lower-than-previous figures are usually understood as negative for the dollar, easing price pressures are for sure good news for the US.”

How could it affect EUR/USD?

Ahead of the key release, the US dollar climbs back closer to a two-decade high amid hawkish Fed expectations and attracts fresh selling around the EUR/USD pair on Thursday. A stronger-than-expected report will be enough to reaffirm bets for a supersized 75 Fed rate hike move in September. This, in turn, should provide an additional lift to the already elevated US Treasury bond yields and continue to boost the USD.

Conversely, softer data is more likely to be overshadowed by the prevalent risk-off environment, which should continue to lend some support to the safe-haven greenback. Apart from this, concerns over an extreme energy crisis in Europe might continue to undermine the shared currency. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside and any attempted move up should get sold into.

Eren Sengezer, Editor at FXStreet, offers a brief technical overview and writes: EUR/USD stayed above 1.0020 (Fibonacci 23.6% retracement of the latest downtrend, 20-period SMA). Additionally, the Relative Strength Index (RSI) indicator on the four-hour chart started to edge higher after having retreated to the 50 area earlier in the day, confirming the bullish tilt in the near-term technical outlook.”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, 1.0080 (Fibonacci 38.2% retracement, 100-period SMA) aligns as next resistance before 1.0130 (Fibonacci 50% retracement) and 1.0145 (200-period SMA). Supports are located at 1.0020, 1.0000 (psychological level, static level) and 0.9980 (50-period SMA).”

Key Notes

  •  US ISM Manufacturing PMI Preview: Slowing growth or recession?

  •  EUR/USD Forecast: Euro bears remain hesitant

  •  EUR/USD to decline towards the 0.95 over the coming month – Rabobank

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).