Global macro overview for 23/08/2017:
Three Flash PMI numbers will be released today from the US. The most important one is PMI Manufacturing because it's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy. The market participants expect PMI Manufacturing to increase slightly from 53.3 to 53.4 points in the reported month. The data at this level reaffirm that this sector of the US economy is still expanding at a moderate rate, which is supported by yesterday's August report for the Richmond Fed's manufacturing benchmark, that held steady at 14 points (fifth straight month of expansion).
According to the July IHS Markit report, the manufacturing sector in the US has been improving at the fastest rate in four months. The upturn in business conditions was largely driven by marked and accelerated expansions in both output and new orders. Meanwhile, firms added to their payrolls and raised purchasing activity at the quickest rates since February. Business confidence reached a six-month high, as firms became more optimistic regarding future output. Inflationary pressures remained relatively muted, despite a pick up in the rate of input cost inflation. In conclusion, the solid and sustained pace of growth in manufacturing activity will positively affect the US GDP expectations for the third quarter and might start to strengthen the US Dollar across the board.
Let's now take a look at the USD/JPY technical picture at the H4 time frame. The market reversed from the technical resistance at the level of 109.84 and currently, it is on the way to test the technical support at the level of 108.79 for the fifth time. Despite the oversold market conditions, the bias remains bearish due to a lack of momentum growth at this time frame.
