USD/JPY: Trading the Philly Fed Manufacturing Index November 2013

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 USD/JPY.

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 September release looked strong, coming in at 19.8 points. This easily beat the estimate of 15.4 points. The markets are expecting a weaker reading in October, with an estimate of 15.8 points. Will the index again surprise the markets with a strong release?

Sentiments and levels

The dollar is enjoying a solid run against the yen, closing the week with gains for the third straight week. USD/JPY is knocking on the doorstep of the 100 level and could push above this key level. The dollar shrugged off Janet Yellen’s support for continued QE, and the possibility of a December taper is bullish for the dollar. So, the overall sentiment is neutral on USD/JPY towards this release.

Technical levels, from top to bottom: 102.50, 101.44, 100, 98.90,  97.80 and 96.59.

5 Scenarios

1. Within expectations: 14.0 to 18.0: In such a case, the yen is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 18.1 to 22.0: An unexpected higher reading can send USD/JPY above one resistance level.
3. Well above expectations: Above 22.1: The chances of such a scenario are very low. The pair could break two resistance lines on such an outcome.
4. Below expectations: 14.0 to 17.9: A poor reading could push USD/JPY downwards, and one support level could be broken as a result.
5. Well below expectations: Below 14.0: A  sharp drop  would signal worsening conditions in the manufacturing sector. In this scenario, the pair could break two support levels.

For more on the yen, see the USD/JPY forecast.

To follow this event live:  [do action=”calendar-event” eventid=”7d4bfaef-42f7-4b25-afdb-871aa3c41505″/]