EUR/USD: Trading the ISM Services PMI May 2015

The ISM Non-Manufacturing PMI (Purchasing Manager Index) is based on a survey of purchasing managers in sectors other than manufacturing. Respondents are surveyed for their view of the economy and business conditions in the US. A reading which is higher than expected is bullish for the dollar.

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

Published on Tuesday at 14:00 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of the health of the economy.

The PMI continues to point to expansion in the services sector, with readings well over the 50-point line. In March, the index came in at 56.6 points, very close to the estimate. Little change is expected in the April report.

Sentiments and levels

With the recent improvement by the euro, the correction we are seeing in the pair is now well established. This does not change the bigger picture which is for a lower euro (and could change later in the year), but after the breakout of 1.1050, the turn around in German bunds and the momentum we are seeing, it could get worse for EUR/USD bears before it gets better. The US dollar needs better numbers to recover, and this isn’t at hand. The euro could remain bid also with mediocre figures. So, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1450, 1.1373, 1.1270, 1.1113, 1.1050, and 1.1000.

5 Scenarios

1. Within expectations: 53.0 to 59.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 59.1 to 63.0: An unexpected higher reading can send the pair below one support line.
3. Well above expectations: Above 63.0: Such an outcome could result in the pair breaking below a second support line.
4. Below expectations: 49.0 to 52.9: A weak reading could lead to EUR/USD breaking above one resistance line.
5. Well below expectations: Below 49.0: In this scenario, the pair could push above a second resistance level.

For more about the euro, see the EUR/USD forecast.

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