EUR/USD: Trading the US ISM Manufacturing PMI

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The ISM Manufacturing PMI (Purchasing Manager Index) is  based on a survey of purchasing managers in the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions in the US. Traders should treat the index as a market-mover, which can affect the direction of EUR/USD. A reading which is higher than the estimate is bullish for the dollar.

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

Published on Friday at 15:00 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 US Manufacturing PMI has looked sharped in its first two readings of 2013, and has been above the 50-point threshold each time, indicating expansion in the manufacturing sector. The estimate for the March reading stands at 52.7 points. Will the index meet or beat the market forecast?

Sentiments and levels

The inconclusive elections in Italy have rattled the markets worldwide. We can expect the euro to remain under pressure as Italian politicians scramble to pick up the pieces. In addition, the real economy of the Eurozone, at least outside Germany, continues struggling in a deep recession, and everybody knows that. While things aren’t so rosy in the US, the economy is still experiencing growth and the markets still believe that the Fed might begin tightening, despite the dovish control. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3290, 1.3255, 1.3170, 1.3130, 1.3110 and 1.3030.

5 Scenarios

  1. Within expectations: 51.0 to 55.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 55.0 to 57.0: An unexpected higher reading can send the pair below one support line.
  3. Well above expectations: Above 57.0: Such an outcome would likely push EUR/USD downwards, and a second support level might be broken as a result.
  4. Below expectations: 49.0 to 50.9: A weaker reading than forecast could push the pair higher, and one resistance line could break as a result.
  5. Well below expectations: Under 49.0: A reading deep in negative territory would likely hurt the dollar, possibly breaking a second resistance line.

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

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About Author

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.

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