Home USD/JPY: Trading the Philly Index March 2012

USD/JPY: Trading the Philly Index March 2012

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 business climate and sentiment in the US.  A reading which exceeds the 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

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  February reading  rose to 10.2, which was above the market forecast of 9.0. However, traders should note that the index tends to show a lot of volatility, and thus the market predictions are often off the mark. The forecast for March calls for a further rise, up to 11.8.  Will the index continue its upward swing this  month?

Sentiments and levels

The current account deficit in Japan, together with the recent easing by the BOJ, are weighing on the yen. In contrast, the US economic situation is continuing to improve.  So, the overall sentiment  is bullish  on USD/JPY towards this release.

Technical levels, from top to bottom: 85.50, 84.50, 83.50, 82.87, 82.20,  81.60 and 80.60.

5 Scenarios

Within expectations: 8.0 to 16.0: In such a case, the yen is likely to rise within range, with a small chance of breaking higher.

Above expectations: 16.1 to 20.0: An unexpected higher reading can send USD/JPY  above one resistance level.

Well above expectations: Above 20.0: The chances of such a scenario are very low. The pari could break two or more resistance lines on such an outcome.

Below expectations: 3.0 to 7.9: A lower reading than forecast would push USD/JPY downwards, and one support level could be broken.

Well below expectations: Below 3.0: A weak reading would signal  worsening conditions in  the manufacturing sector. In this scenario, the pair could break two or more support levels.

For more on the yen, see the USD/JPY forecast.


Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.