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

US Manufacturing PMI Outlook

The Institute of Supply Management (ISM) will publish this Thursday, at 14:00 GMT, the result of its latest survey of manufacturing companies, also known as the ISM Manufacturing PMI. The index is expected to have dropped to 52 in August, down from 52.8 the previous month. The indicator will provide a fresh update on activity in the manufacturing sector amid rising borrowing costs and growing concerns 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 of prices paid, as it reflects business sentiment around future inflation. The index is expected to retrace sharply from 60 in the previous month to 55.5. Although lower than previous figures are often understood as negative for the dollar, the easing of price pressures is certainly good news for the US.”

How could it affect EUR/USD?

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

Conversely, weaker data is likely to be overshadowed by the prevailing risk environment, which should continue to provide some support for the safe-haven dollar. Apart from this, concerns about an extreme energy crisis in Europe could 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 attempts to move higher should be sold.

Eren Sengezer, Editor at FXStreet, gives a brief technical summary, writing: EUR/USD held above 1.0020 (Fibonacci retracement of 23.6% last downtrend, 20-period SMA). Furthermore, the Relative Strength Indicator (RSI) on the four-hour chart started to rise after retracing the 50 zone earlier in the day, confirming the bullish bias in the short-term technical outlook.”

Eren also points out the important technical levels to trade the EUR/USD: “To the upside, 1.0080 (Fibonacci 38.2% Retracement, 100-period SMA) lines up 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).”