The Institute for Supply Management reported that the US manufacturing PMI contracted in June falling to 49.7 from the previous reading of 53.5, disappointing forecast of 52.1. 50 marks the line between contraction and expansion, and June's reading was the first time below 50 since July 2009′s reading of 48.9.

According to the breakdown, the new orders component saw the biggest fall from a reading of 60.1 to contraction levels of 47.8.

us
Source: Institute of Supply Management (Manufacturing PMI report)

S&P500 futures, which can be a gauge of risk sentiment got knocked down from 1356 area to 1350, but failed to break below as the 5-min chart shows. Still momentum has at least flattened if not bearish since the RSI fell below 40 and tagged 30.

Now, if the S&P500 can stay below the 1356 area, which started the bearish reaction to the poor data, the bears are still in charge during the US session, and the 1350 might be vulnerable.

Also, if the RSI in the 5-min chart can remain below, we can also say that the near-term bearish momentum is maintained.If we do extend below 1350, 1339-1340 is the next intra-session support level to monitor.

This bearish scenario will confirm USD-strength, and strengthen the case for EUR/USD's correction toward 1.2540-1.2550 area.

S&P500 chart 5min 7/2/2012

S&P500

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.