Forex U.S. Review – Dollar gains on manufacturing data, focus now turns to NFP

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EURUSD mostly consolidated in the U.S. session after a huge drop in the previous session following weak euro zone manufacturing data and slowing German GDP. After the ISM manufacturing data came out better than expected and showed there was still expansion in the U.S. economy, dollar jumped, consequently bringing down euro to the lowest level in three weeks, to 1.4226, versus the open price of 1.4279. This was a third day of decline for the single currency.

GBPUSD marked a steep decline all the way up to the release of the ISM manufacturing data from the United States when cable dipped to 1.6129. In the prior European session data showed U.K. manufacturing activity contracted in August, and the gloomy economic picture left sterling vulnerable to further losses.

The Swiss franc continued to gain strength as demand for safe havens remained strong as concerns on overall global economic growth remained strong after weak growth data and slowing factory output from both sides of the Atlantic today. Also investors are being cautious ahead of the significant U.S. non farm payroll report on Friday. USDCHF opened the session at 0.7992 and edged down except for a brief spike immediately after the U.S. manufacturing data to 0.8023, before continue its downfall to a session low of 0.7925.

The Canadian dollar rose against its U.S. counterpart in the first half of the session toward its strongest level in four weeks up to the release of the Institute for Supply Management manufacturing report which showed Canada’s main trading partner is still growing even if at a slower pace. USDCAD touched a low of 0.9734 from the open of 0.9788. Yesterday the pair reached the lowest level since August 4. Good data from the U.S. also positive for the Canadian economy as 70 percent of Canadian exports go south of the border.

USDJPY opened New York at 76.00 and edged down with a brief spike right after the ISM manufacturing data helped boost the dollar to 77.17 before heading back down to a session low of 76.72. Dollar could not hold on to gains long against the safe haven yen because investors are gearing up before a U.S jobs report tomorrow which is forecast to show U.S. payroll growth slowed. Economist estimates are for 68,000 jobs added in August, versus 117,000 in July. This does not paint a good picture, despite better than expected manufacturing data today, but the U.S. non farm payroll data is probably the most significant data that moves dollar.

Gold was little changed during the session. The metal opened at $1,823.48 and flattened out into a range except for a brief spike down after the U.S. manufacturing data, falling to $1,814.03, then bounced back to previous levels and flattened out. Investors are waiting to see the possibility of further Fed quantitative easing are closely watching a key Fed policy meeting starting September 20 as well as tomorrow’s NFP data.