The US ISM Non-Manufacturing PMI (Purchasing Managers’ Index) is based on a survey of purchasing managers, excluding those in the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions in the US. A reading which is higher than the market forecast is bullish for the dollar. Traders should also note that this is the final key release out of the US before the presidential elections on November 6.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Monday at 15:00 GMT.
Indicator Background
Analysts are always interested in the views of purchase managers about the economy, as they are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends. Thus, PMI readings are quite important, and an unexpected reading (higher or lower than the forecast) could affect the movement of USD/JPY.
The October release came in at 55.1 points, which was well above the estimate of 53.2 points. It also marked the third straight month that the reading beat the forecast. However, the markets are expecting a slight drop this month, with a forecast of 54.6. Will the index exceed the estimate once again in November?
Sentiments and levels
The continuing uncertainty over the severe crises in Greece and Spain have soured the markets and continue to weigh on the Euro. The failure of the EU Summit regarding Spain was followed by a serious deterioration in Greece, just when the country seemed close to a deal. Greece is on the brink of bankruptcy, and time is running out to reach an agreement for the next installment of aid under the bailout agreement. With the new constitutional fears and the IMF suggestion that euro-zone government will take a loss, it seems that both Greece and Germany are close to their limits. Eurogroup leader Jean-Claude Juncker hinted that Greece may have to leave the euro-zone before the end of the year, and such statements will only deepen the markets concerns and hurt the euro.
Regarding the US elections on Tuesday, a re-election of President Obama (who got some positive NFP news) could boost the dollar on safe haven flows – fears that it will be hard to resolve the fiscal cliff. A victory for Romney could weaken the dollar on risk appetite. There are additional scenarios, but we’ll have to wait for the elections results first. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 130, 1.2960, 1.2880, 1.28, 1.2750 and 1.2670.
5 Scenarios
- Within expectations: 51.0 to 58.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 58.1 to 62.0: An unexpected higher reading can send the pair below one support level.
- Well above expectations: Above 62.0: A sharp jump by the index could push EUR/USD downwards, and a second support level might be broken as a result.
- Below expectations: 48.0 to 50.9: A weak reading could push the pair upwards and break one resistance line.
- Well below expectations: Below 48.0: A sharp contraction by the index would indicate increasing contraction in the US economy. This could push the pair higher, possibly breaking a second resistance line.
For more on the euro, see the EUR/USD forecast.
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