By Orbex
The US dollar was seen falling for the second consecutive day on weak manufacturing data and dovish Fed comments. Manufacturing activity in the US slowed in May with the ISM manufacturing PMI easing to 52.1 from 52.8. This was the lowest reading since October 2016. St. Louis Fed President James Bullard said that a rate cut maybe required partly due to the escalating trade tensions globally.
The euro currency was seen posting strong gains on the day. The gains were partly driven by a weaker USD. Eurozone’s final manufacturing PMI was confirmed at 47.7, matching the flash estimates. With the exception of France and Spain, manufacturing activity from other regions in the Eurozone fell below the 50-level marking contraction in the sector.
The common currency tested the 1.1250 handle on Monday before pulling back modestly. The gains also saw EURUSD breaking past the falling trend line. A follow through from here, above 1.1250 is required in order to confirm further upside in price. To the upside, the next main target is seen at 1.1400 while any pullback could see the EURUSD testing the short-term support at 1.1200.
The monthly manufacturing PMI from the UK saw the activity falling into contraction. IHS/Markit’s manufacturing PMI index recorded a reading of 49.4 on the index. This was below the estimates of 52.5 and down from 53.1 previously. Construction PMI is due later today. Forecasts show a modest pick up in construction activity from 50.5 in April to 50.6 in May.
The currency pair has been trading flat within 1.2716–1.2606 levels since last week. This sideways range could potentially give way for a breakout. The bias remains to the upside for the moment. A close above 1.2716 will trigger a possible correction in GBPUSD. The initial target is seen at 1.2895 followed by 1.2975 levels of resistance. To the downside, a close below 1.2606 could, however, signal further declines.
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Gold prices posted strong gains on Monday maintaining the solid momentum from last Friday. Price rallied to a four-month high of 1327.89 before pulling back modestly. The gains came led by the trade uncertainty and a possibly slower pace of growth in the US for the month of May. The dovish comments from the St. Louis Fed also helped investors in their flight to safety.
The current reversal off the highs near 1327.89 comes as price tests the upper resistance level. A close below the 1320.81 level could, though, see gold prices retreating lower. The main support at 1285 remains key to the downside. However, the overall bias is now to the upside. The unfilled gap from Friday’s close at 1304.18 remains the initial target followed by a move to the 1290 handle.
By Orbex