ISM Manufacturing PMI Dives – Risk Aversion Continues

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The US Manufacturing sector is growing at a slow pace: ISM Manufacturing PMI dropped to 53.5. The estimations stood on 58.1 points, although other indicators such as the Chicago PMI provided hints that it would be worse. EUR USD shakes while the yen and the franc extend their gains against the dollar.

USD/JPY is now around 80.70. USD/CHF fell below 0.84. EUR/USD initially dropped but is now moving higher, at 1.4430. Resistance is at 1.4450. USD/CAD is on the rise, as US weakness is bad for Canada. GBP/USD ticks higher, but is limited by 1.6430.

The manufacturing sector was surprisingly strong last month, and scored 60.4 points, indicating rapid expansion. A drop was expected, but this is a major slowdown.

The purchasing managers’ index for the services sector will be published on Friday. There are fears that it might drop below the critical 50 point mark that separates between expansion and contraction. It fell below 53 points last month.

Earlier today, ADP reported that only 38,000 jobs were gained in the US private sector. With early expectations standing on nearly 180K, this was a very bitter disappointment. The impact was seen in USD/JPY that took a dive to around 80.80, and also in USD/CHF that plunged to new all time lows. Both pairs continued lower since then.

On the other hand, the gains of EUR/USD and GBP/USD were quite limited, and were later erased. This is classic risk aversion trading – whereas the “safe haven” low yielding currencies gain against the dollar, and other “risky” currencies weaken on fears that the US weakness will weigh on everybody.

In other US figures, the accompanying ISM Manufacturing Prices figure eased to 76.5 points, significantly lower than 81.9 that was expected. Construction Spending rose by 0.4% as expected, though last month’s figure was revised to the downside, from 1.4% to only 0.1%.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.