Weaker ISM is Just What the DXY Needed
Joe Perry October 1, 2019 4:23 PM
The US ISM Purchasing Managers Index (PMI) headline dropped from 49.1 in August to 47.8 in September, versus an expectation of 50.1! This is the worst ISM data going back 10 years. All components were lower as well. DXY has been on a tear lately after breaking out of the trading range it has been in from September 12th to September 25th. Nearly 100 pips higher from that breakout near 98.70, the DXY is in need of a correction. Today, the ISM Manufacturing data was the catalyst to allow the US Dollar to pull back.
Source: Tradingview, FOREX.com
- DXY had closed yesterday at the highs from September 3rd at 98.37.
- Today, it has taken out BOTH the upward sloping trending going back to early 2018, as well as, 127.2% Fibonacci extension from the highs on August 1st to the lows on August 9th
- The 1272% Fibonacci extension from the highs on September 3rd to the lows on September 13th are just above today’s highs at 99.80.
- The RSI is diverging from price. This is an indication that price may reverse.
- The psychological level of 100.00 is just above today’s highs.
- Although the day is not over yet, if DXY were to close near current levels (99.37), the daily candle can be considered a gravestone doji, inverted hammer, or shooting star, all of which are 2 candlestick reversal patterns.
Support for DXY will be at the breakout of the prior trading range and the upward sloping trendline near 98.70/98.80. Below that, the 50 Day Moving Average is at 98.56. Third support level is near the lows of august 9th and the long-term upward sloping channel line near 97.00.
If the DXY can unwind and pullback a bit to support, this may give it permission to move higher. Tomorrow we have ADP employment data released, and on Friday Non-Farm Payrolls. If these numbers come out better than expected, the DXY may continue its move higher and test the 100 level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.