Dollar Pauses, Key Levels Pre-ISM

12/02/2019 2:20 pm EST

Focus: FOREX

Ashraf Laidi

Founder, Intermarket Strategy Ltd.;

Markets are waiting on latest ISM Manufacturing numbers, writes Ashraf Laidi.

The U.S. Dollar Index losing steam across the board as markets await U.S. manufacturing ISM data. There are  three items occurring at the same time ahead of the US trading session that can have a huge impact on markets: 1. Rallying non-energy commodity currencies are led by the New Zealand dollar (NZD) after China's manufacturing PMI rose unexpectedly into expansion for the first time in seven months; 2. US crude oil bounces after posting the biggest daily drop in 2.5 months; 3. U.S. futures head back into the red partly on Trump's reinstating tariffs on Brazilian and Argentinean steel.
NZDJPY was stopped out after China's data. A new FX trade has been issued, supported by 4 charts as agriculture commodities outperform metals and energy over the past three months.

USD Pauses, Key Levels Pre ISM - Dow Tran Indu Dec 2 2018 (Chart 1)

U.S. stock indices initially ignored China's insistence on the United States rolling back tariffs before signing off Round 1 of the trade talks, but risk is gradually coming off as USDJPY drops to 109.51 from 109.70s. 

The Cboe Volatility Index (VIX) is up for the third straight session, DAX continues to fail around the 13300 and FTSE100 at 7430s.
Meanwhile, the divergence between the Dow Jones Industrial Average and the Transportation sub index (above chart) continues as Transports are unable to regain their record highs from 15 months ago.

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