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 Manufacturing Index at 22.5 within expectations
Here are all the details, and 5 possible outcomes for USD/JPY.
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 indicator jumped to 28.0 points last month, its highest level since February 2011. This easily beat the estimate of 19.7 points. The markets are expecting a drop to 22.8 points in the upcoming release.
Sentiments and levels
US numbers have been moving upwards, although recent employment figures were soft. In Japan, there are mounting concerns that another sales tax hike scheduled for October could weigh heavily on the economy. As well, a growing yield gap is favorable to the surging US dollar. The pair’s momentum is upward and we could see the yen continue to lose ground. So, the overall sentiment is bullish on USD/JPY towards this release.
Technical levels, from top to bottom: 110.68, 108.58, 107.68, 105.44, 104.92 and 104.25.
5 Scenarios
- Within expectations: 21.0 to 24.0: In such a case, the yen is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 24.1 to 28.0: An unexpected higher reading can send USD/JPY above one resistance level.
- Well above expectations: Above 28.0: The chances of such a scenario are very low. The pair could break two or more resistance lines on such an outcome.
- Below expectations: 17.0 to 20.9: In this scenario, USD/JPY could lose ground and one support level could be broken as a result.
- Well below expectations: Below 16.9: A very weak reading would signal slower activity in the manufacturing sector. In this outcome, the pair could break two or more support levels.
For more on the yen, see the USD/JPY forecast.
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