The day’s gain was never going to set the world alight, yet, in context of the losses seen in recent months, perhaps it should be happy with what it got
Manufacturing data broadly softened in July, which dragged the headline figure down -1.5 points to 56.3 (57.8 prior). This was slightly below expectations of 56.3 yet still relatively elevated compared with China and Japan.
The heaviest decline was from new orders which dropped -1.3 pts yet this remains elevated at 60.4. Prices provided the heaviest contribution which increased by 7 pts to leave the index at 62 (55 prior). So far for July we have seen prices spike for Japan, China and Australia as commodity prices have rallied. On the face of it this spell good news for inflationary pressures, so long as the costs are passed onto manufacturer’s customer’s and these rising prices are also absorbed by the consumer to raise realised and expected inflation. We are a long way off from confirming such a chain of event but every trend must start somewhere.
Where the ISM manufacturing data fell slightly below consensus, Markit PMI slightly beat forecasts. The 1.3-point gain is the fastest monthly expansion in 9 months and is strong enough to suggest a trough may have been seen.
Construction spending was a disappointment at -1.3%, it’s 2nd lowest reading since October and completely missed expectations of 0.4% (0.3% prior). The Core personal consumption expenditure made up for this though by beating expectations of 1.3% and remaining at 1.5%.
Whilst, overall the data was good by US standard this year, it was not enough to make a noteworthy dent on the Dollar’s decline. Neither data from US or Europe convinced traders there was any urge for banks to tighten policies which saw money flow back into bonds and push yields lower.
93.15 is a pivotal area for H1 as it marks the 27th June low and sits near the 50-hour MA. Whilst a move above this resistance area may prompt a spike higher fuelled by stops triggering, price action from the low appears to be corrective show we cannot yet rule out another break to new lows whilst below the 93.53 swing high.
We see the AUDUSD is showing signs of weakness from the highs and is on the cusp of confirming a double top on H4. Price is back below the 80c level and provided a higher low overnight and a break higher for DXY assumes we may see follow-through of the bearish move on AUD.