Mid-Day Report: Sentiments Lift as ISM Back above 50, Dollar in Range

Markets Sentiments are lifted by better than expected ISM manufacturing index. Stocks open higher and extends early strength with DOW reaches as high as 9557 so far. Crude oil follows by rebound back to above 71 after dipping to as low as 69.53 earlier today. Meanwhile, gold also recovers mildly to above 958. On the other hand, dollar and yen are generally lower following the release even though they both bounded in range against major currencies.

ISM Manufacturing index rose sharply to 52.9 in August, above the 50 expansionary/contractionary mark for the first time since Jan 2008. Improvements are seen across components with production up to 61.9, price paid up to 65, new orders up to 64.9. However, note that imports indeed dropped back to 49.5. Also, employment component remains contractionary even though it rose slightly to 46.4. Pending home sales rose more than expected by 3.2% mom in June while construction spending dropped -0.2%.

/

Released earlier today, UK manufacturing PMI disappointed by dropping back to below 50 at 49.7 in August. Eurozone manufacturing PMI was unexpectedly revised up from 47.9 to 48.2 in August. Eurozone unemployment rate climbed to decade high of 9.5% in July. Nevertheless, Germany unemployment rate was unchanged at 8.3% in August while unemployment also dropped -1k. From Swiss, Q2 GDP contracted less than expected by -0.3% qoq, -2.0% yoy in Q2. SVME PMI rose much more than expected to 50.2 in August.

/

The RBA announced to keep the cash rate unchanged at 3% in September. While this has been widely anticipated, the neutral tone, rather than a hawkish one, in the accompanying statement disappointed the market a bit. Aussie is noticeably weaker after the release. More in RBA Leaves Cash Rate At 3% With A Neutral Bias On Monetary Policy.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6201; (P) 1.6265; (R1) 1.6350; More

Intraday outlook in GBP/USD remains neutral as consolidation from 1.6152 continues. Nevertheless, it should be near to completion. Break of 1.6152 will bring resumption of fall from 1.7043 and should target 1.5983 key support next. On the upside, while another rise cannot be ruled out, recovery should be limited below 1.6622 resistance and bring fall resumption finally.

In the bigger picture, we're still preferring the case that medium term correction from 1.3503 has completed at 1.7043 already, on bearish divergence condition in daily MACD and RSI. Break of 1.5983 will confirm this case and will possibly bring resumption of medium term down trend from 2.1161 to 1.3503 low and beyond. On the upside, in case of another rise above 1.7043, we'd continue to look for reversal signal as we expect the correction from 1.3503 to conclude inside resistance zone of 1.6428/7332 (38.2% and 50% retracement of 2.1161 to 1.3503).

GBP/USD

Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
04:30AUDRBA Interest Rate Decision3.00%3.00%3.00% 
05:45CHFGDP Q/Q Q2-0.30%-0.90%-0.80%-0.90%
05:45CHFGDP Y/Y Q2-2.00%-3.00%-2.40% 
06:00EURGerman Retail Sales M/M Jul0.70%0.70%-1.80%-1.30%
07:30CHFSVME-PMI Aug50.247.144.3 
07:55EURGerman PMI Manufacturing Aug F49.24949 
07:55EURGerman Unemployment Change Aug-1K30K-6K-5K
07:55EURGerman Unemployment Rate Aug8.30%8.40%8.30% 
08:00EUREurozone PMI Manufacturing Aug F48.247.947.9 
08:30GBPPMI Manufacturing Aug49.751.550.850.2
09:00EUREurozone Unemployment Rate Jul9.50%9.50%9.40% 
14:00USDISM Manufacturing Aug52.950.148.9 
14:00USDISM Prices Paid Aug655755 
14:00USDPending Home Sales M/M Jul3.20%1.60%3.60% 
14:00USDConstruction Spending M/M Jul-0.20%-0.20%0.30%0.10%