The US manufacturing sector is looking good, at least according to ISM. The manufacturing purchasing managers’ index jumped to 59.7 points, reflecting robust growth in this small but important sector. It is a beat on 58.2 that was seen in November and a similar number that was on the cards now.
The internal components are a bit more nuanced: prices paid are up to 69 points, and this implies higher inflation, something that the Fed is looking for for quite a while. On the other hand, the employment component is down from 59.7 to 57, so the manufacturing sector may be a significant contributor to the Non-Farm Payrolls report. New Orders jump to 69.4, the highest since 2004.
2018 began where 2017 ended for the US dollar: an extension of the sell-off. However, the greenback began stabilizing and has been on a recovery path already earlier. This upbeat top-tier figure solidifies its stand. For EUR/USD, it means another push towards 1.20.
The low so far has been 1.2005, a drop of already 50 pips on the day. If this line breaks, the next line of support is at 1.1960 which was a stepping stone on the way up. 1.1910, a veteran line, follows. On the topside, we find 1.2090, the high water mark of 2017.
Where next for EUR/USD? The common currency could still find its feet later during the week. We will get some inflation figures from Europe and the Non-Farm Payrolls report from the US of course. The manufacturing sector does not necessarily represent the rest of the economy.
More: EUR/USD: where next after breaking above 1.20?