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Market Wrap
Today during the US trading session, we received the important ISM Manufacturing PMI data which includes the Manufacturing, Employment and Prices Paid readings. Overall, the data for April was disappointing but still in the expansionary levels. April’s ISM Manufacturing PMI reading was 60.7 v’s 65.0 expected and below the March reading of 64.7. There are supply chain issues and a backlog of orders which are pushing prices higher as seen in the recent US PCE readings. The report noted Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential.
European bourses ended slightly up for the day with the DAX up 0.67%, Euro Stoxx 50 up 0.55% and the FTSE 100 up 0.12%. In the US, the DJIA was trading slightly higher at the London session close but the S&P500 and Nasdaq were coming off their US session open highs as the US dollar index (DXY) started to rise from the 90.90 level.
Earlier today we had the IHS Markit Data for European Manufacturing with the German reading being revised lower to 66.2 in April from the preliminary reading of 66.4. Again, severe supply side disruptions were the reasoning for the slip lower and a contributing factor towards output price inflation.
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The DXY had found resistance at a previous H4 swing low and swing high pivot level and pulled back into the recent range from the April 29th lows, with the 50-period moving average acting as a magnet into the London close.
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The EURUSD had also found resistance at some day’s lows and closed the London session at 1.2055 with the daily 50 and 200 exponential moving averages below as a target for the bears to test still.
On the ActivTrader sentiment indicator the bears are 65% so not an extreme reading yet but, in the range, to see enough traders get squeezed out of their short positions whilst they trade against the daily EURUSD trend.
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If the daily 50 ema proves to much for the US dollar bulls to get above on the DXY, this will fuel the EURUSD higher, and the 1st target would be the swing high from the 25th of February 2021.
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The higher commodity prices translated to the commodity currency pairs with the AUDUSD gaining the most with a 0.53% rise. The price action on the Aussie chart has been going sideways for the best part of 2021 and is currently in the middle of that trading range, with the ActivTrader sentiment reading showing the bears up 69% suggesting there could be more upside in the near term.
