The Philadelphia Fed Manufacturing Index is an important leading indicator, and is based on a survey of manufacturers in the Philadelphia area. It examines manufacturers’ opinions of business activity, and helps provides a snapshot of the health of the manufacturing sector. A reading which exceeds the forecast is bullish for the dollar.
Update: Philly Fed Index leaps to 23.9 points
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Thursday at 14:00 GMT.
Indicator Background
The Philadelphia Fed Manufacturing Index measures regional manufacturing growth. The manufacturing sector is a vital component of the economy and the index provides a useful reading for determining whether the economy is in a growth or contraction phase.
The index improved to 17.8 points in May, easily beating the estimate of 14.3 points. This was the indicator’s highest level since last September. The markets are expecting a lower reading in June, with the estimate standing at 15.6 points.
Sentiments and levels
The high exchange rate continues to weigh on Eurozone growth, which has not improved since the ECB cut interest rates in June. We cannot rule out another attempt of Draghi to talk down the exchange rate. Also, the issues in Portugal are a stark reminder that the underlying issues of the debt crisis are still not behind us. In the US, the Fed’s favorite jobs indicator is back to pre-crisis levels, and a respected Fed watcher says that the time is ripe for the Fed to acknowledge the improvement in the economy. Yellen’s comment about a rate hike if inflation and employment levels improve has helped the greenback this week. All in all, there is now more room to the downside for the pair. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3677, 1.3650, 1.3585, 1.35, 1.3450 and 1.34.
5 Scenarios
- Within expectations: 13.0 to 18.0: In such a case, the pair is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 18.1 to 21.0: An unexpected higher reading can send EUR/USD below one support level.
- Well above expectations: Above 21.0: The chances of such a scenario are low. The pair could break below a second support line on such an outcome.
- Below expectations: 10.0 to 12.9: A weak reading could push EUR/USD higher, and one resistance line could be broken as a result.
- Well below expectations: Below 10.0: A very poor release would signal worsening conditions in the US manufacturing sector. In this scenario, the pair could break through a second resistance line.
For more on the Euro, see EUR/USD.