10:00am NY Time US ISM Non-Manufacturing PMI Forecast 54.2 Previous 53.0
ACTION: BUY 57.0 SELL 51.00 USD/JPY
We’ll looking for a possible trade from the release of U.S. ISM Non-Manufacturing PMI today, or better known as the U.S. Services PMI; and as it’s with all Purchasing Manager’s Indexes, it’s a leading indicator of the nation’s Services sector, and many investors look at this release for immediate directional preferences on the future of the economy. With the current analyst’s expectation above the 50 level at 54.2, and in the event that 57.0 is reached, we could see some USD strength and JPY weakness; however, if the opposite is true, or 51.0 figure is released, expect to see stronger JPY and possibly risk aversion driven market, as at this stage a decline in future sentiment should provide reason for traders to consolidate from recent rally.
If our tradable releases are reached, there is a good expectation of 50 pips of market movement within the next 120 minutes on both USD/JPY and EUR/USD pairs, among other USD crosses. I’ll be looking to trade USD/JPY on a worse than expected release as USD/JPY may show more of a decline, and sell EUR/USD on a better release as EUR/USD may break the current support areas and breakout to the downside…
With ECB Rate decision scheduled for this week, we could see some early weakness in the currency early week.
DEFINITION:
“The Institute of Supply Management (ISM) Non-Manufacturing Index measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation’s currency. To produce the index, purchasing managers are surveyed on a number of subjects
including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.”
Related posts:
- Trading Plan For US ISM Non-Manufacturing PMI 06/03/10
- Forex News Trading Plan For US ISM Non-Manufacturing PMI 01/05/11
- Forex News Trade – US ISM Non-Manufacturing PMI 11/03/10
- Forex Trading Strategy For ISM Non-Manufacturing PMI 07/06/10
- Forex News Trading US ISM Non-Manufacturing PMI 04/05/11
- Forex News Trading Plan For US ISM Manufacturing PMI 02/01/11
- US ISM Non-Manufacturing PMI 03/03/2010
- Forex News Trading Plan US ISM Manufacturing PMI 03/01/11
- US ISM Non-Manufacturing PMI 02/03/10
- Forex News Trading US ISM Non-Manufacturing PMI 05/04/11
{ 4 comments… read them below or add one }
Hi Henry,
May I ask why you chose the USD/JPY pair?
Isn’t the EUR/USD pair more liquid? And there’s a greater inverse correlation between EUR/USD?
Mike:
Both USD and JPY are safe haven currencies, so they react with less noise when it comes to high impact news releases that has the potential of altering market sentiment.
If you were to trade EUR/USD, you have to factor in the safe haven status of USD and in the event of a better news, should USD really rise against EUR? Better news usually means better risk sentiment as demand for higher return should be driving the market, this is typical as money will move from safer instruments to riskier instrument, such as from U.S. treasuries into stocks. So better US news actually takes money away from USD (sell of treasuries) and put money into stocks, commodities, and futures… all are risk appetite movements which results in weaker USD. But the other side of the argument is that US economic outlook improves on the back of strong NFP release, thus FOMC should be hiking interest soon… do you see the confusion?
Henry
Thanks Henry.
So may I follow up; Why have you decided to sell EUR/USD on a better release …
and as you say … “as EUR/USD may break the current support areas and breakout to the downside…”
Mike:
Because of the issue in Greece, Euro is under extreme pressure – possible collapse of Greece will create domino effect on Spain, Italy, and even Portugal.
As EUR may be the 2nd weakest currency aside from JPY, from a surprising better USD news, there is a chance for EUR/USD to break support and retest low levels in the 1.3300 area. It will be a choice that I’ll make during news release time using my Currency Strength Meter.