The Philly Fed Index has had a stronger effect on currencies in recent months, due to big surprises and swings. The upcoming release provides a trading opportunity. Here are the details, and 5 possible scenarios for EUR/USD.
Published on Thursday, at 14:00 GMT.
Indicator Background
The Federal Reserve region of Philadelphia always had a significant impact on the markets with its survey of around 250 manufacturers. The importance rose in the past year, due to high volatility. The shocking drop under 0 in the summer of 2010 provided a sign that QE2 was coming. A drop under 0 means deteriorating economic conditions. 
The rise to a peak of 43.4 points in March after a strong February provided the ground for the end of QE2. But in recent months, the indicator dropped, showing that growth is slowing down. This goes hand in hand with other indicators.
May’s figure was terrible: a drop to 3.9 points, much worse than a score of around 20 points that was expected. This was quite a shocker, all over again. A correction to around 7 points is now predicted, showing that the US economy is only slowing down, and that another recession isn’t underway.
Sentiment and Levels
As the European debt issues continue, the sentiment is bearish once again. Despite this bearishness, the current environment isn’t a risk averse environment at the moment. So, a good result will help the dollar, while a bad result will weaken it.
Technical levels, from top to bottom: 1.4650, 1.4550, 1.4450, 1.4375, 1.4282, 1.4160, 1.4030, 1.3950 and 1.3860.
5 Scenarios
- Within expectations: 4 to 11 points: in this case, the pair will shake and is likely to slide within the range, without breaking below support.
- Above expectations: 12 to 19 points: A stronger recovery will convince the markets that the fall last month was exaggerated, and that slow recovery continues. The dollar is likely to gain, with EUR/USD having a good chance of breaking below support and settling lower/
- Well above expectations: Above 20: Such a result is a quick return to normal levels. This isn’t likely. In such a case, a second level of support will be at risk for the euro.
- Below expectations: 0 to 4 points: A drop under the levels last month will be worrying, though a positive number is still a growth number, so the pair might rise but will have a small chance of breaking above resistance.
- Well below expectations: A negative number: Deteriorating conditions for the first time in 9 months will be very bad for the dollar. A break of one resistance level is very likely, and the pair can settle higher.
For more on EUR/USD, see the EUR/USD.