US ISM Manufacturing PMI overview

The Institute of Supply Management (ISM) will release its latest manufacturing business survey result, also known as the ISM Manufacturing PMI for March at 14:00 GMT this Monday. The index is expected to remain in contraction territory for the fifth straight month and come in at 47.5 for March. Given that the Fed looks more at inflation than growth, investors will keep a close eye on the Prices Paid sub-component, which is anticipated to rise to 53.8 from 51.3 in February.

How could it affect EUR/USD?

Ahead of the key release, the risk-on mood weighs on the safe-haven US Dollar (USD) and assists the EUR/USD pair to stage a goodish rebound from sub-1.0800 levels, or a one-week low touched earlier this Monday. A weaker-than-expected ISM Manufacturing PMI will be seen as another sign of a slowdown in the US economy and reaffirm expectations that the Federal Reserve (Fed) might soon pause the rate-hiking cycle. This could exert additional downward pressure on the Greenback and allow the major to build on its intraday rally of around 90 pips.

Conversely, a stronger print is unlikely to provide any respite to the USD, suggesting that the path of least resistance for the USD is to the downside and supports prospects for a further near-term appreciating move for the EUR/USD pair. That said, any immediate market reaction is likely to be limited as the focus remains on this week's release of the closely-watched US monthly employment details - popularly known as the NFP report - on Friday. Nevertheless, the broader fundamental backdrop and the intraday price action support prospects for a further near-term appreciating move for the major.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical overview and outlines important technical levels to trade the EUR/USD pair: “With the latest rebound, the Relative Strength Index (RSI) indicator on the four-hour chart rose to 50, suggesting that sellers are struggling to stay in control. On the downside, 1.0820 (Fibonacci 23.6% retracement of the latest uptrend) aligns as key support level. If the pair falls below that level and starts using it as resistance, it is likely to meet interim support at 1.0790 (static level) before testing 1.0760 (100-period Simple Moving Average (SMA), Fibonacci 38.2% retracement).”

“On the other hand, 1.0860 (static level, 20-period SMA) is the first resistance ahead of 1.0900 (psychological level) and 1.0930 (static level, March 23 high),” Eren adds further.