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September 7, 2016

Trading signals 07.09.2016. Digesting Non-Mfg. PMI

Trading signals 07.09.2016. Digesting Non-Mfg. PMI

Update: both trading calls on Pound and Gold from my previous market commentary hit the mark! Check here for more info.

So yesterday we got a fresh update from Institute of Supply Management (ISM) on business activity in non-manufacturing sector in US also known as Purchasing Managers Index (PMI).  This indicator bases on the survey of leading purchasing and supply executives of the United States. Importance of this gauge is hard to overstate, considering that US economy relies heavily on domestic consumption rather than production.

August data was particularly crucial as precise estimates on the state of US economy could help traders to understand FED plans on monetary policy tigheting. Basically the data was a key part of the puzzle named “September rate hike” and its lackluster headline figure could argue for the FED standing pat on its next meeting.

The report showed that in August business activity in Non-Manufacturing Sector slid to the slowest pace of growth for more than 6 years, though remained in expansionary zone. Headline figure came at 51.4 points while analysts projected the reading at 55.4.

Together with a slack in jobs data this paints a gloomy picture for the FED pondering over the timeframe for rate hike. Septembers odds have retreated from their peaks to 15%, December odds have also declined to 40.3%.

Weak PMI data led steep greenback losses. Dollar index sunk below 95 level, while Pound managed to cut through two-month resistance level at 1.34:

pound

 

Panic-stricken investors rushed into Gold, sending it to two-week highs. XAUUSD rose more than 2 percent and the appetite were satisfied only near $1,350 level:

gold rush

Despite there is a slim chance the Fed will raise rate in September we can’t take this end off the table so uncertainty will keep driving the action on gold.

As the summer holiday is over and FED meeting looms its hard to expect flat moves on Dollar. The currency is expected to trim down part of declines but growth should be limited. Later, closer to FOMC decision it is expected that investors will shrink their bets on greenback resulting in its decline.

Pound has a good chances to extend rally as fears over Brexit consequences could be overstated. Recent economic updates proves UK economy fares quite well despite gloomy forecasts.

 

Update on Trading Calls:

 

XAUUSD – Buy Limit at $1,340, Target –  1,355, SL – 1,335

 

GBPUSD – Buy Limit at 1.3290, Target – 1.3450, SL – 1.32400

 

USD/JPY – Sell at 102.00, Target 100.50, SL – 102.50

 

And what are your forecasts on these pairs? Share your opinion in facebook comments!

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