A fair amount of optimism is building leading up to this morning's 10:00am EDT August release of the U.S. ISM manufacturing index. But given declines in both the Philadelphia and New York Fed manufacturing surveys, an August disappointment is a possibility.
The August number is expected to come in at 53.8, on the back of a July number of 55.4--the highest reading for 2013. Also keep in mind: the July number crushed expectations for a reading of just 51.8, and June's number was a modest 50.9.
The euro against the dollar has slipped 1.7% this past week, while the yen has fallen 2.7%. Prudent minds might consider paring back long dollar positions, looking for better levels to redeploy the trade given how far we have come and the possibility the number fails to continue to outperform expectations.
Looking forward, keep an eye on the new index orders and the production component index. A continuation of strong new index orders and production components will create expectations of stronger PMI data to come, which will flow nicely into September expectations for a tapering of monetary accommodation by the Federal Reserve--a dollar positive for a longer- to medium-term trading view.
(Vincent Cignarella is a currency strategist/columnist for DJ FX Trader and co-inventor of The Wall Street Journal Dollar Index. His 30 years in currency markets include working as a bank dealer at major money-center commercial banks; managing corporate-hedging for a large multinational; serving as a principal and general partner of a major currency brokerage firm; and most recently working in FX sales with Santander in New York.)
Write to Vincent Cignarella at vincent.cignarella@dowjones.com
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(END) Dow Jones Newswires
September 03, 2013 08:20 ET (12:20 GMT)
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