Global macro overview for 03/10/2017:
The ISM Manufacturing PMI from the US has hit a 13-year high. Market participants expected a drop to 57.9 points from 58.8 points the last month, but the number delivered was at the level of 60.8. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the US economy. The main reason behind such a good data was found in recent consequences of natural disasters. Disruptions to the supply chains caused by Hurricanes Harvey and Irma resulted in factories taking longer to deliver goods and boosted raw material prices (the biggest problems were noted in food, beverage, tobacco and chemical products sector). As a result, the ISM's supplier deliveries sub-index soared 7.3 points to 64.4 last month. A lengthening in suppliers' delivery time is normally associated with increased activity, which is a positive contribution to the ISM index. Nevertheless, the manufacturing growth is still strong and manufacturing employment has hit its highest level since 2011. In conclusion, a paradoxical "positive" impact of the natural disasters in the US economy is really occurring, just as it was anticipated by economists just in the aftermath of the disasters.
Let's now take a look at the USD/JPY technical picture on the H4 time frame. The market tried to break out above the technical resistance at the level of 113.25 again, but failed. It looks like the market is losing upward momentum and a deeper correction might occur anytime soon. Clear and visible bearish divergences on momentum indicators are supporting the view. The next support is seen at the level of 112.19.
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