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Forex: EUR/USD relaxes to 1.3190 after US ISM manufacturing PMI

FXstreet.com (Barcelona) - The EUR/USD printed its highest price just after the publication of disappointing US ADP data, ,at 119K in April instead of the 150K expected (also with the March figure being revised lower from 158K to 131K), and jumped to 1.3242 high. Then, profit taking happened and the pair erased its gains progressively back to the 1.3200 mark. With the release of US ISM data, the market tumbled below the psychological level and is now trading around 1.3190, as of writing.

Investors will be very interested in today’s FOMC meeting. TD Securities analysts believe that the minutes of today’s FOMC meeting may be more interesting than the actual outcome, “as the minutes will show that the weaker run of US data has shifted the debate away from the exit of QE”. Today’s statement should also give signs of what is to come: “We expect the assessment of the economic and inflation outlook to be downgraded, reflecting a shifting emphasis relative to March when the prospect of a labor market recovery was beginning to tilt the balance towards tapering. This time around the rising uncertainty about the impact of fiscal austerity on growth and further moderation in core inflationary pressures will likely shift the balance back to an easing bias. And even though we do not expect the dial to go all the way to increasing the size of purchases, the risk of this has increased, albeit one that remains quite low”, wrote analyst Alvin Pontoh.

The April update of the ISM manufacturing PMI dropped from 51.3 to 50.7, disappointing investors by coming below market consensus of 50.9. ISM prices paid fell from 54.5 to 50.0, below 53.0 consensus. Markit manufacturing PMI improved slightly, from 52.0 to 52.1 in April. Construction spending in the US contracted by -1.7% in March, according to the US Census Bureau, disappointing the market that was expecting a 0.7% rise. February data was revised higher from 1.2% to 1.5%.

“1.3185 comes as immediate support, and as long as above, further gains should be expected, with renewed buying interest above mentioned Fibonacci resistance opening doors for a continuation towards 1.3320/40 price zone”, wrote FXstreet.com independent analyst Valeria Bednarik.

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