US Factory Orders
Monday (7/2), we had poor ISM Manufacturing data for June. During the 7/3 US session, we had better-than-expected Factory Orders from May, posting a gain of 0.7% vs. 0.1% expectation and -0.7% in April. Although this data is for May, keep in mind that orders take a while to make it to the assembly line, sometimes more than month. So factory orders is basically a lagged release of a leading indicator for the economy.
Anyway, the market did find some risk-on fuel after this release and edged higher during the US session.
The S&P500 for example rallied from 1355.20 overnight low to almost 1370 during the US session but stalled out after the session ended.
The EUR/USD pushed from a new low for the week at 1.2553 back to 1.2620 and is sitting at 1.26 during early Asian session. In the 1-hour chart, this brought price action to a declining short-term channel resistance and the RSI to 60. In a mode of consolidation, the market is likely to drift lower through the Asian session into the European session without any headlines.
Australian retail sales can provide a temporal pivot after which volatility might pick up bit especially if it was dead going into the release. This is likely going to effect the AUD more, but as we saw from the RBA reaction yesterday, the market can move in risk-on risk-off dynamic affecting EUR/USD, even though it has nothing to do with the RBA decision to hold rates. There is resistance to monitor in the 1.0350-1.0380 area. IF the market can get there during the 7/4 session, I will consider fading it.
Retail sales are forecast to be 0.3% for May after a -0.2% reading posted for April. A negative number might reinforce the idea of fading today’s US session risk-rally. The market might even do it with positive data. I am very convinced the market will be range-bound throughout the rest of the 7/4 session. Where to anticipate range boundaries is the hard part.
UK Services PMI at 4:30AM EDT 7/4 can be another temporal pivot. The reading for June is forecast to be about 52.9 vs. the May reading of 53.3. This would not be a significant slide as the reading would remain expansionary (above 50). A drop below 50 can add to the case of a risk-off intra-session swing.
GBP/USD is trading in a range between 1.5654 and 1.5727 after Friday’s rally. Poor data can shift the range lower, but I would still anticipate range-bound price action. Meaning even if the range is broken, if it is still ahead of Thursday’s ECB meeting look for it to come back into the range, barring any headlines that DO set expectations toward the ECB meeting and policy decision.
Fan Yang CMT is a forex trader, educator and Chief Currency Analyst of FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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