Service ISM Disappoints, Dollar Firms, but Range-Bound

The consolidative phase is threatening to turn into an outright correction as the the dollar firmed toward session highs on news that the service ISM fell to 46.4 from 47.0 and consensus expectations for a 48 print. New orders fell and the the jobs component fell to 41.5 from 43.4. Factory jobs data looks better. ADP had the smallest loss of mfg jobs since last Sept. Cahllenger had the fewest auto worker offs since June '08. And ISM mfg reported its highest employment reading in 11 months.

Separately, factory orders surprised to the upside, rising 0.4% rather than the -0.8% the consensus forecast. The details were strong, with durable goods orders revised to -2.2% from -2.5%, but more importantly non-durable goods orders/shipments up a strong 2.7%. Factory inventories fell 0.8%. Core capital goods orders were up 2.6%.

Lastly we note that NIESR said the UK economy contracted by 0.4% in the three months through July and added that it looked to be stabilizing. It was hopeful May represents the trough.

The dollar continues to firm and profit-taking is becoming more evident in equities as well. Treasuries have reversed early weakness and now are posting solid gains. Stops are thought to be stacked below $1.4350 in the euro and above JPY95.50.