EUR/USD: Trading the US ISM Non-Manufacturing PMI

The ISM Non-Manufacturing PMI (Purchasing Managers 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.

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

Published on Wednesday 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 and sentiments  could be an indication of the health of the economy.

The Index has been hovering around 53 since July 2011, indicating some growth in the non-manufacturing and services sectors of the economy. The September reading of 53.3 was somewhat higher than the forecast of 51.1, and October’s forecast is for 53.0. Another reading above the forecast would bode well for the dollar.

Sentiments and levels

The health of the Euro Zone economy continues to keep analysts and investors nervous. The Greek debt crisis is weighing heavily on both the Euro Zone economy and the Euro currency. Growing uncertainty about the future of the Euro is clearly not going to calm jittery markets. Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3838, 1.3750, 1.37, 1.3630, 1.3550 and 1.3430.

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: 55.1 to 58.0: An unexpected higher reading can push the pair below one support line.
3. Well above expectations: Above 58.0: Such an outcome would push down EUR/USD, and a second support line might be broken as a result.
4. Below expectations: 49.0 to 50.9: A drop  in the Index close to or below the +50 level  could push the pair upwards and break one line of resistance.
5. Well below expectations: Under 49.0: Such a scenario would indicate contraction of the US economy, rattling markets and propelling EUR/USD upwards, possibly breaking a second resistance line.

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