Summary:

  • ISM manufacturing PMI 58.1 vs 59.4 exp
  • Prices paid and new orders also both miss forecasts
  • Gold retests prior support region from 1205-1215

The second economic release of note from the US this afternoon has shown a slightly disappointing outcome as far as the manufacturing sector is concerned, with the ISM reading falling to its second lowest level in a year. The ISM manufacturing PMI for July fell to 58.1 from 60.2 beforehand, with the reading coming in below the 59.4 expected. We earlier had the final manufacturing PMI, which even though it has a less significant impact on the market than the ISM equivalent exhibits a pretty good correlation and the recent underperformance in the former could be seen to have forewarned today’s miss in the latter. 

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 Both the USA PMI and the ISM PMI fell in July, indication that the manufacturing sector’s growth may be starting to slow. Source: XTB Macrobond

In addition to the headline ISM data, the release also contains other pertinent information as far as the markets are concerned. Two of the most important are the number of new orders and the prices paid as they are believed to indicate the future prospects for the area and inflationary pressures respectively. On this front both could be seen to be negative for the USD as the prices paid fell to 73.2 (75.3 expected and 76.8 prior) and the new orders dipped to 60.2 from 63.5 prior. 

With the Fed decision later tonight, it may be a good time to look at the Gold market, with the precious metal falling lower today and revisiting a longer term support. The region from 1205 to 1215 has previously been a key swing level and with price back around these levels the next couple of days of price action could prove decisive. A failure to hold above this level once more would open the way for more downside, and an extension of the downtrend seen in recent months. However, if buyers can defend this level then a recovery may lie ahead with plenty of scope for recouping losses considering that the market has tumble around $150 since April. 

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 Gold is testing a key support level from 1205-1215 ahead of the Fed decision this evening. Price action here could prove pivotal. Source: xStation