USD/JPY: Trading the ISM Manufacturing PMI Jul 2013

ISM Manufacturing PMI (Purchasing Managers’ Index) is based on a survey of purchasing managers in the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions in the US. A reading which is higher than the market forecast is bullish for the dollar.

Here are all the details, and 5 possible outcomes for USD/JPY.

Published on Thursday at 14:00 GMT.

Indicator Background

Analysts are always interested in the views of purchase managers about the economy, as they are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends. Thus, PMI releases are considered market-movers and an unexpected release could affect the movement of USD/JPY.

Manufacturing PMI has been pointing to slight expansion in the manufacturing sector, with readings above the 50 level in all releases in 2013 but one. The indicator came in at 50.9 points in the July release, and the markets are expecting a stronger reading this time around, with an estimate of 52.1 points.

Sentiments and levels

Abenomics is showing some signs of success, notably inflation releases which have been pointing upwards. Further positive Japanese releases could boost the yen, which has improved and broken away from the 100 level. However, traders should be on the lookout for any hints from the Federal Reserve about QE tapering, which would be a dollar-positive event.

In the US, we are again being treated to mixed numbers, and the dollar will have trouble moving higher without stronger US data. So, the overall sentiment is bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 100.85, 100, 98.90, 97.80, 96.71 and 93.79.

5 Scenarios

  1. Within expectations: 49.0 to 55.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 55.1 to 58.0: An unexpected higher reading can send the pair well above one resistance line.
  3. Well above expectations: Above 58.0: A sharp expansion in the manufacturing sector could push USD/JPY upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 46.0 to 48.9: A weak reading could push USD/JPY downwards and break below one level of support.
  5. Well below expectations: Below 46.0: A sharp contraction would indicate deeper weakness in the manufacturing sector. This would likely push the pair downwards, possibly breaking a second support level.

For more about the yen, see the USD/JPY.

To follow this event live:  

Powered by FXstreet.com
Get the 5 most predictable currency pairs

Leave a Reply

Your email address will not be published. Required fields are marked *