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
- 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.
- Above expectations: 12.1 to 15.0: An unexpected higher reading can send EUR/USD below one support level.
- 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.
- 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.
- 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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