October has not been a pretty month for the US manufacturing machine which started with a very poor Empire State report.
Since then manufacturing has disappointed at nearly every release and the ISM report at 15.00 gmt will make it 2 in a row if we get a bad number.
Expectations are for a slight drop to 56.2 from 56.6 in September so the market is looking for a drop. We do see some activity tail off late into the year as the chart shows below so there’s some seasonality there.
US ISM manufacturing to Sep 2014
The market probably won’t go overboard on a worse number (unless it’s really bad) but a continuation of the drop in manufacturing will raise questions over the economy into the final quarter of 2014. The bigger clue will be the Empire State numbers released on the 17th.
As I’ve mentioned on the last USD/JPY post a good/great number will give the buck another kick higher, not that it needs an excuse at the moment. It’s likely to take a big drop to near 50 to bring about a big drop in the dollar and even that might be limited.
Unless the number stinks a dip now towards 113.50 on the data could give you a buying op but I’d still caution keeping it tight and manageable.
