USD/JPY: Trading the ISM Services PMI Sep 2013

ISM Non-Manufacturing PMI (Purchasing Managers’ Index), is based on a survey of purchasing managers in the services sector. Respondents are surveyed for their view of the economy and business conditions in the services industry. 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 readings are quite important and an unexpected reading could affect the movement of USD/JPY.

The index jumped from 52.2 to 56.0 points in August, easily surpassing the estimate of 53.2 points. The markets are expecting another strong release in September, with an estimate of 55.2 points.

Sentiments and levels

The markets continue to speculate that the Federal Reserve could pull the trigger on QE tapering as early as September, and such talk is bullish for the dollar. Japanese inflation indicators were solid last week, indicating that the Japanese economy is responding to Abenomics. Analysts will be paying close attention as the BOJ releases a policy statement late in the week, and this event could have a major impact on the movement of the pair. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 101.44, 100.85, 100, 98.90, 97.80 and 96.71.

5 Scenarios

1. Within expectations: 52.0 to 58.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 58.1 to 62.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 62.0: A sharp jump by the index could push USD/JPY upwards, and a second resistance line might be broken as a result.
4. Below expectations: 48.0 to 51.9: A weak reading could push USD/JPY downwards and break one level of support.
5. Well below expectations: Below 48.0: A sharp drop in the index would likely push the pair downwards, possibly breaking a second support level.

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