U.S. Dollar (DXY) Declines As ISM Manufacturing PMI Misses Expectations

Key Insights

• U.S. dollar found itself under pressure after the release of a disappointing ISM Manufacturing PMI report for September. 
• GBP/USD gained 1% after UK scrapped plans to cut taxes for high-earners. 
• Commodity-related currencies rallied as commodity markets rebounded. 

U.S. Dollar Is Under Pressure At The Start Of The Week

U.S. Dollar gained downside momentum after the release of ISM Manufacturing PMI report, which indicated that ISM Manufacturing PMI declined from 52.8 in August to 50.9 in September, compared to analyst consensus of 52.2.

The U.S. Dollar Index moved below the 112 level after the report was released. Most likely, the U.S. dollar will remain sensitive to disappointing economic reports as it has recently tested multi-decade highs.

EUR/USD Is Stuck Near 0.9800

EUR/USD is swinging between gains and losses as the situation in the European economy remains challenging. Today, traders had a chance to take a look at the final reading of the Euro Area Manufacturing PMI report.

The report indicated that Euro Area Manufacturing PMI declined from 49.6 in August to 48.4 in September, compared to analyst consensus of 48.5. Numbers below 50 show contraction. It remains to be seen whether the disappointing data will put additional pressure on the euro as the current rebound may continue due to profit-taking.

GBP/USD Rallies As UK Scraps Plans For Tax Cuts

GBP/USD gained strong upside momentum after UK scrapped plans to cut taxes for high-earners. Previously, markets were worried that tax cuts and increased spending would crush the country’s finances.

GBP/USD is currently trying to settle above the 20 EMA at 1.1250. In case this attempt is successful, GBP/USD will head towards the next resistance level, which is located at 1.1365. A move above this level will open the way to the test of the resistance at 1.1450.

On the support side, the nearest support level for GBP/USD is located at 1.1085. If GBP/USD declines below this level, it will move towards the next support level at 1.1000. A successful test of the support at 1.1000 will push GBP/USD towards the support at 1.0935.

Commodity-Related Currencies Rebound As Commodities Rally

Today, silver rallied 7% while WTI oil gained 5%, providing significant support to commodity-related currencies.

AUD/USD rebounded towards 0.6500, while NZD/USD managed to settle back above 0.5700. USD/CAD found itself under strong pressure and moved below the 1.3650 level.

Traders should note that the commodity rally has been extremely strong, so they must be prepared for a pullback due to profit-taking. In this scenario, commodity-related currencies will move away from recent highs.

USD/JPY Pulls Back Below The Key 145 Level

USD/JPY made an attempt to settle above the 145 level but faced significant resistance and pulled back towards 144.50.

Traders remain worried about potential interventions from the Bank of Japan. Most likely, USD/JPY will need significant catalysts to settle above the 145 level and test new highs.

For a look at all of today’s economic events, check out our economic calendar.