The US dollar rose to post a fresh two-year high at 99.32 before pulling back. The declines came after the ISM manufacturing PMI contracted for the first time in three years.
The manufacturing activity index fell to 49.1 in August from 51.2. This raised concerns once again about a potential recession, fueled by trade war uncertainty.
Euro Rebounds After ISM PMI
The euro rebounded on Tuesday after prices initially slipped to a fresh two-year low at 1.0925. Economic data from the eurozone was thin. However, the producer prices index report showed a 0.2% increase on the month. This was below the estimates of a 0.3% increase but better than the 0.6% decline in July.
EURUSD Could Rebound in the Short Term
Price action after the EURUSD fell to a two-year low, which indicates a possible rebound on the horizon. However, the gains will be limited to the recently breached support of 1.1030. A retest of this level to establish resistance will, however, confirm the downside. But the currency pair could remain range bound within 1.1030 and the lows of 1.0925.
Sterling Jumps as MPs Move to Stop No-Deal Brexit
Brexit and political uncertainty continue in the UK. In the latest move, lawmakers are planning to vote to stop Britain from leaving the EU without a deal in hand. However, PM Johnson reiterated that the UK will be leaving the EU regardless of a deal. The UK is also possibly headed for another general election if lawmakers vote to block a no-deal Brexit.
GBPUSD Pares Losses From Earlier This Week
The currency pair recovered off the day’s lows. GBPUSD initially slipped to new lows of 1.1957, before turning bullish. The bullish momentum, if maintained, could see the currency pair attempting to test 1.2170 level. However, this will be subject to the current short-term resistance at 1.2082 being cleared.
Gold Back at 6-Year Highs
The precious metal logged gains on Tuesday after the ISM report on manufacturing. With the trade war being blamed for the decline in global manufacturing, investors piled into safe-haven assets. Gold prices retested the level of 1543 as US equities fell, reflecting the market sentiment.
Can XAUUSD Breakout to New Highs?
The current gains look to be coming in with weak momentum. Unless there is a strong close above the 1543 handle, XAUUSD is likely to remain flat in the near term. A convincing close above 1543 is required to establish further highs. We expect XAUUSD to remain trading flat or close to the current highs. The lower support at 1518 could likely stall the declines.