US ISM Manufacturing Up Next

The latest US ISM manufacturing reading is due later today and will likely be the main focus ahead of tomorrow’s NFP results. The August results is forecast to remain in positive territory at 52.1, down from 52.8 prior. However, on the back of the shockingly bad PMIs we saw just last week in the US, there are downside risks into today’s reading.

Nonetheless, USD bulls appear to be looking beyond any data weakness in the US. With the Fed having reaffirmed its commitment to continued tightening and with this week’s hawkish comments regarding the rates outlook next year (Williams & Mester), USD appears unlikely to be rocked by any data weakness today, especially given the proximity to tomorrow labour market reports. On the other hand, if the data falls in line with expectations, this will no doubt give USD more of a boost into tomorrow’s results, weighing further on equities prices near-term.

Where to Trade US ISM Manufacturing?

USDJPY

The breakout above the bull flag top has seen USDJPY trading higher once again. Price is now quickly closing in on the current YTD highs and, with retail traders heavily short and MACD and RSI both bullish, the focus is on a break of current highs targeting a broader move up to 146.97. Worthwhile being hands on as we test the highs, however, given the risks of a false break (we’re seeing bearish divergence in momentum studies).