Home EUR/USD: Trading the Philadelphia Fed Index January 15 2014

EUR/USD: Trading the Philadelphia Fed Index January 15 2014

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.

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

Published on Thursday at 15:00 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 index has not looked sharp lately, and the November reading of   7.0 points was well below the estimate of 10.3. The markets are expecting an improvement in December, with the estimate standing at 8.8 points.

Sentiments and levels

At last week’s ECB policy meeting, Mario Draghi didn’t offer anything tangible and this hurt the euro.  With inflation indicators barely  persistently weak, the  danger of deflation is certainly present and is weighing on the euro. The ECB might have to act later in the year to support the system, and this could push the euro to lower levels.

Over in the US, the swaggering dollar ran out of steam after an awful NFP. However, most US  data has been  positive, and another round of  tapering in January, could push EUR/USD lower. However, for the upcoming week, the headline NFP  will likely counter  any euro weakness. So, the overall sentiment is neutral on  EUR/USD towards this release.

Technical levels, from top to bottom: 1.3710, 1.3675, 1.3615, 1.3550, 1.3450 and 1.34.

5 Scenarios

  1. Within expectations: 6.0 to 12.0: In such a case, the  pair is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 12.1 to 15.0: An unexpected higher reading can send EUR/USD  below one  support level.
  3. Well above expectations: Above 15.0: The chances of such a scenario are very low. The pair could break  below a second support line  on such an outcome.
  4. Below expectations: 3.0 to 5.9: A weak reading   could push EUR/USD higher, and one  resistance line  could be broken as a result.
  5. Well below expectations: Below 3.0: A  very poor release  would signal worsening conditions in the manufacturing sector. In this scenario, the pair could break through a second resistance line.

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

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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.