Global macro overview for 04/07/2017

Global macro overview for 04/07/2017:

The US ISM Manufacturing Index for June surges to the highest level since August 2014. The index rose from 54.9 points to 57.8 points in June and it was well above the market consensus of 55.0 points. The sub-indices also provided a good bunch of optimistic data. The Orders Index increased from 59.5 points to 63.5 points while production rose from 57.1 points to 63.2 points. Moreover, there was a significant increase in order backlogs which should provide support for production over the next few months.The Employment Index registered 57.2 points, an increase of 3.7 points from the May reading of 53.5 points. The Prices Index registered 55 points in June, a decrease of 5.5 points from the May reading of 60.5 points indicating higher raw materials' prices for the 16th consecutive month. Overall, out of 18 manufacturing industries, 15 reported growth in June.

The overall ISM data for the last month does not suggest that manufacturing is a significant barrier to further normalization by the Federal Reserve and there is flicky evidence that the US economy has recovered from a soft patch during the second quarter.To confirm this scenario more data will be needed and Fed policymakers might choose the wait-and-see approach to the end of the year in order to justify the next interest rate hike in December 2017. Nevertheless, as long as the domestic economy is performing relatively well, the employment is high and the unemployment rate is low, the next interest rate is still on the table.

Let's now take a look at the EUR/USD technical picture at the H4 timeframe. The market is turning down from the overbought trading conditions, but the momentum indicator is still above the fifty level. The next technical support is seen at the level of 1.1295 - 1.1283 and only a sustained breakout below this level would put the bears in control over this market.