EUR/USD: Trading the ISM Non-Manufacturing PMI August 2014

The ISM Non-Manufacturing PMI (Purchasing Manager Index) is  based on a survey of purchasing managers in sectors other than manufacturing. Respondents are surveyed for their view of the economy and business conditions in the US. This important economic indicator is released during the first week of every month.

Update:  ISM Non-Manufacturing PMI jumps to 58.7 – USD rises – EUR/USD close to the edge

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

Published on Tuesday at 14:00 GMT.

 

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of the health of the economy.

The PMI continues to  point  to  expansion in  the services sector.  Last month, the index came in  at 56.0 points, very close to the estimate of 56.2 points.  Little change is expected in the July release, with an estimate  of 56.6 points.

Sentiments and levels

Although the euro is trading at lower levels,  inflation remains too far  from the ECB’s target. And while it takes time for  June’s wide measures  to kick in, Mario Draghi may decide not to wait and  try to talk the euro down in various ways, as that would certainly help in achieving his mission. In the US, the  excellent data  that we’ve received is likely to keep the dollar bid for quite some time, even  though there is no  timetable as to  when the US rate hike will actually occur. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3585, 1.3550, 1.35, 1.34, 1.3325 and 1.3295.

 

5 Scenarios

1. Within expectations: 54.0 to 59.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 59.1 to 63.0: An unexpected higher reading can send the pair  below one  support line.
3. Well above expectations: Above 63.0: Such an outcome  could result in the  pair breaking below  a second support line.
4. Below expectations: 50.0 to 53.9: A  weak reading could lead to  EUR/USD breaking above one resistance line.
5. Well below expectations:  Below 50.0: A reading close to or below 50, which marks contraction, could result in the pair pushing below a second support level.

For more about the EUR, see the EUR/USD forecast.

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