Home EUR/USD: Trading the Philly Index October 17 2012

EUR/USD: Trading the Philly Index October 17 2012

The Philadelphia Fed Manufacturing Index is an important leading indicator, and is released monthly. It examines manufacturers’ opinions of business activity, and helps provides a snapshot of the business climate and sentiment in the US. A reading which is higher than the market forecast is bullish for the dollar.

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

Published on Thursday at 14:00 GMT.

Indicator Background

The Philadelphia Fed Manufacturing Index measures regional manufacturing growth in the Philadelphia region. The manufacturing sector is a vital component of the economy and the index provides a useful reading for measuring the health and direction of the economy.

The index has been steadily improving and climbed to -1.9 points in the previous reading, beating the estimate. The  markets are forecasting  an improvement to 1.3 for the October reading, This would mark the first  time the index has been in  positive territory since  April. Will the uptrend continue this month?

Sentiments and levels

The uncertainty over a Spanish bailout continues to weigh on the markets. Although a Spanish bailout request isn’t likely before October 21st, Spain could still surprise, especially if yields rise. The upcoming EU Summit will likely bolster the euro, given such past events. Leaks towards the event and major announcements at its end usually boost markets in the short term. Implementing decisions and making real progress is of course, another matter entirely. In addition, the economic situation in Europe, including in the core, does not show positive signs, to say the least. The euro is on the move, there is room for further rises. Later, it doesn’t look so promising for the euro. So, the overall sentiment is bullish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.34, 1.3290, 1.3170, 1.3105, 1.3060 and 1.30.

5 Scenarios

  1. Within expectations:  -2.0 to 5.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations:  5.0 to 9.0: An unexpected higher reading can send EUR/USD below one support level.
  3. Well above expectations: Above 9.0: The chances of such a scenario are low.  Such a reading would help the dollar, and the pair could break two or more support levels.
  4. Below expectations:  -6.0 to -2.1: A weak reading than forecast could push EUR/USD upwards, breaking one resistance line.
  5. Well below expectations: Below -6.0: A very poor reading would signal worsening conditions in the manufacturing sector. In this scenario, the pair could push above two or more resistance lines.

For more on the euro, see the EUR/USD 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.