Forexlive Americas FX news wrap: ISM manufacturing index surprises to the upside

Forex news for North American trading on September 1, 2020

• S&P and NASDAQ close at record highs
• The focus shifts to jobs in Wednesday's US economic calendar
• WTI crude oil futures settle at $42.76
• A look at the latest spending trackers
• Brainard Q&A: Fed has robust set of tools, committed to using all of them
• US dollar extends gains after Brainard (but not because of her)
• Feds Brainard: Important that Fed policy pivots to accommodation from stabilization
• European shares close marginally lower on the day
• SNB's Maechler: We have a very strong franc
• New Zealand GDT price index -1.0% at auction
• US construction spending for July 0.1% vs. 1.0% estimate
• US ISM August manufacturing index 56.0 vs 54.8 expected
• US August final Markit manufacturing PMI 53.1 vs 53.6 expected
• Canada August Markit manufacturing PMI 55.1 vs 52.9 prior
• The lessons policymakers take from Japan are the ones they will apply domestically
• The GBP is the strongest and the CHF is the weakest as NA traders enter for the day

the ISM manufacturing index for August surprise to the upside. It rose to 56.0 from 54.2 last month. That was solidly above the 54.8 the expectations. New orders soared to 67.6 from 61.5 in July. That was much higher than the 58.8 expectations. Employment, however remains below the 50 level at 46.4 vs. 44.3 last month. That is indicative of a contracting manufacturing sector.

The ISM gains The stock market supported to the upside. It also helped to turn around the dollars fortunes. Coming into the session, the dollar was lower vs. all the major currencies with the exception of the JPY. The dollar currently is trading mostly higher with gains against the CHF, CAD, EUR, and AUD. It remains lower vs. the NZD and near unchanged vs. the GBP. The S&P's Maechler did say today that the franc was "very strong". That helped to weaken the CHF. It was the weakest of the major currencies today.

Later in the New York afternoon session, Fed Gov. Brainard spoke about pivoting to accommodation from stabilization. She commented that the Fed had more ammunition to keep pushing toward strong growth/lower unemployment given the new inflation framework introduced last week by Fed chair Powell. She is intent on keeping the "pedal to the metal" from accommodation standpoint.

Although the comments could be construed as more dovish - i.e. yields are closing near session lows - the dollar actually rose even more. The ranges and changes for the different points on the yield curve showed sharp swings in the 10 and 30 year yields. The 10 year yield went from a high of 0.7292% a low of 0.667%. The move and the 30 year was more pronounced with a high of 1.514% and a low nearly 10 basis points lower at 1.417%. The 2-10 year spread also narrowed from the 57.39 basis point close yesterday to 53.64 basis points currently.

The Brainard comments also gave the stocks a boost into the close. The major US stock indices closed near session highs with the NASDAQ and the S&P closing at all-time record levels once again.

Some technical levels for the major currency pairs into the new trading day:

• EURUSD. The EURUSD traded above the 1.2000 level to 1.2010 in the early New York session, but could not sustain momentum above the key natural resistance level. As a result buyers turned to sellers and the price started to step lower. The low for the day reach 1.1900 and stalled. In the new day that level along with the rising 100 hour moving average 1.18912, will be downside targets to get to and through if the sellers are to take more control. On the topside watch the 1.1935 level. That was the close from yesterday and also and intraday low before being broken in the New York afternoon session.
• GBPUSD: The GBPUSD reached a high price 1.34816 near the opening for the North American session. That was 117 pips above the closing level from yesterday at 1.3364. The next 8 hours so the price get within 4 pips of the closing level from yesterday (the low reached 1.33684), before going sideways into the close. The price is trading at 1.33843. In the early trading for the new day be mindful the 1.33946 to 1.3400 area as potential resistance. Stay below would keep the sellers from the New York session more in control. Moving below the 1.3364-68 area would increase the bearish bias with the 1.33178 as the next target. That is home to the 38.2% retracement of the move up from the August 24 low.
• USDCHF: As mentioned the CHF was the weakest of the majors. Looking at the USDCHF, it moved above its 200 hour moving average for good in the New York afternoon session. That level comes in at 0.90773. Stay above in the new trading day would be more bullish for the pair (weak for the CHF).
• USDCAD: The USDCAD fell into the North American open with the pair moving below the 1.3000 level (the low reached 1.2993 before rebounding). The move to the upside peaked right at its 38.2% retracement of the move down from the August 25 high AND the 100 hour moving average. Both those levels came in at 1.3087. The price is trading at 1.3070 into the close. It would take a move above the 100 hour moving average and retracement level to tilt the bias more to the upside from here.

Wishing all good fortune in your trading today