The ISM Non-Manufacturing PMI (Purchasing Managers’ Index), also known as the Services PMI, is based on a survey of purchasing managers, who are asked to rate business conditions in the non-manufacturing sector. A reading which is higher than the market forecast is bullish for the dollar.
Here are all the details, and 5 possible outcomes for USD/JPY.
Published on Wednesday at 14:00 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 could affect the movement of USD/JPY.
This PMI has been in the mid-50 range for quite some time, pointing to expansion in the services sector. The index posted a reading of 53.1 points in the May reading, and little change is expected in the upcoming release, with an estimate of 53.4 points.
Sentiments and levels
The markets have been treated to a lot of volatility from US/JPY, and the correction of the dollar and the yen has been quite strong. Now that a new month begins, we could see the long term trend resume and a further weakening of the yen. The BOJ was rattled by the stock market turbulence, and is deploying all measures to “calm the bond markets”. In the US, The Fed has been hinting that it will scale down the current QE program, and it is becoming increasingly clear that QE tapering will happen this year, even though US economic signs are mixed.
It is important to watch the 100 line – if this breaks, we could see a snowball effect. However, it appears more likely that we will see USD/JPY rise rather than fall. So, the overall sentiment is bullish on USD/JPY towards this release.
Technical levels, from top to bottom: 102, 101.44, 100.66, 100, 98.90 and 97.80.
5 Scenarios
- Within expectations: 50.0 to 57.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 57.1 to 60.0: An unexpected higher reading can send the pair above one resistance line.
- Well above expectations: Above 60.0: A sharp jump by the PMI could push USD/JPY upwards, and a second resistance line might be broken as a result.
- Below expectations: 46.0 to 49.9: A reading below the 50 level could push USD/JPY downwards and break one level of support.
- Well below expectations: Below 46.0: A sharp drop by the index would indicate contraction in the services sector. This would likely push the pair downwards, possibly breaking a second support level.
For more on the yen, see the USD/JPY forecast.
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