The Institute for Supply Management (ISM) in the United States just released the manufacturing PMI data for December. According to the findings of the report, the economic activity in the manufacturing sector grew for the 8th consecutive month, which underpins robust recovery.
The manufacturing PMI reached 60.7 index points, up from the previous month's 57.5 points. This is a welcoming development given that the preliminary market forecasts were anticipating a fresh slump to 56.6 index points.
The monthly review that underscores the opinions of the supply executives in the U.S. demonstrates a sizable improvement in New Orders (up 2.8 per cent on a monthly basis) in addition to the underlying gains in manufacturing (3.2 per cent).
"The Manufacturing PMI® signalled a continued rebuilding of economic activity in December, with four of five contributing subindexes in strong growth territory. All six of the biggest manufacturing industries — Fabricated Metal Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; Petroleum & Coal Products; and Food, Beverage & Tobacco Products — expanded."
The news comes at a perfect time for the reeling dollar, which is currently trading at a multi-year low against the euro. It is hoped that the positive improvement in this industry sector will allow the greenback to recuperate in the near future.
Part of the reason for the demise of the U.S. dollar lies in the global depreciation in demand for low-risk securities in favour of assets entailing higher yields and returns. Nevertheless, the other economic releases that are taking place this week are likely to challenge this trend; namely, the non-farm payrolls, which is scheduled for publication on Friday.
As regards the current state of the EURUSD, the price action got stuck trading in a minor bearish channel, which entails the likely continuation of the latest downswing. This is inlined with the forecasts of our comprehensive analysis of the EURUSD from earlier today.
Such expectations are substantiated by the increasingly bearish momentum, as underpinned by the MACD indicator. Meanwhile, the first major obstacle for the bears will be the support level at 1.22500.