USDMXN Higher after Mexico Consumer Confidence beat Forecasts
The USDJPY plunged nearly 60 pips as the US ISM Non-Manufacturing PMI data failed to live up to expectations. The US ISM Non-Manufacturing PMI figure has come in at 52.4, which is markedly lower than the market consensus figure of 55.1.
The USDJPY has therefore extended its bearish run for the week on the back of risk-off sentiment as market players seek safe havens for their money. The economic contraction in the services sector follows a similar outcome in the Manufacturing PMI data from the Institute of Supply Managers on Tuesday. These data show that the US-China trade war may be having more of a domestic effect than policymakers think.
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All roads now lead to tomorrow’s NFP report. The poor manufacturing and services data will make the NFP an even more interesting read. So far, the doves in the Fed have been very bullish about the US economy. Will the Fed have cause to consider further easing? Tomorrow’s result will tell.
In the meantime, the USDJPY is now challenging the neckline of the double top pattern on the daily chart. The deviation to make the USDJPY tradable on the news was surpassed, so we can expect a rigorous challenge of the neckline heading into tomorrow.
The daily candle needs to close with a 3% penetration below the neckline to confirm the double top. This will then confirm further downside for the pair with a measured move to the Aug 13 lows at 105.25. A poor NFP result will strengthen this projection.
An NFP result which is good for the USD could prompt a push above the neckline, which keeps confirmation of the double top at bay. However, only a break above 108.40 price level (double top area) at the 50% Fibonacci line (highs of July 1 and 2) would invalidate the potentially bearish setup on the chart.