The latest US ISM Manufacturing PMI data shows that economic activity in the manufacturing sector contracted once more as the figure dropped from 47.2 in December as against the consensus figure of 49.0. This was also lower than the previous month’s figure of 48.1.
As a result, the US Dollar came under some selling pressure, with the EURUSD posting modest gains of roughly 20 pips on the news release. However, the USD is still up against the Euro on the day following earlier safe-haven bids for the greenback.
A statement by the Chair of the business survey committee of the Institute of Supply Management, Timothy Fiore, identified global trade as the most critical issue affecting many industries, but also expressed optimism that a Phase 1 deal between the US and China would ease economic conditions for several sectors.
The price response to the data was as expected: a modest gain to the upside, which is expected to be capped as the risk-off sentiment continues to prevail. Price may find resistance at the 1.11858 price level (50% Fibonacci retracement), but this may be viewed by USD bulls as a rally point on which renewed selling could be initiated. If this the case, then the initial target would be the 1.11150 price level (38.2% Fibonacci retracement).
Further upside from current levels could test 1.11858; a breach of this area to the upside could target 1.12565 as previously identified.