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

USD/JPY: Trading the Philly Fed Manufacturing Index April 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  is higher than  the forecast is bullish for the dollar.

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

Published on Thursday at 14:00 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 Index bounced back nicely in March, climbing to 2 points from -12.5 points, and beating the estimate of -1.6. The markets are expecting a slight gain in the April reading, with a forecast of 2.7 points. Will the index meet or beat the upcoming forecast?

Sentiments and levels

The general direction of the USD/JPY  remains higher, and the pair is within striking distance of the elusive 100 level. However, the upcoming international meetings of the IMF and the G-20, alongside the report from the US Treasury are putting pressure on the Japanese  currency after the recent big moves. We could see the pair could make a correction this week, before advancing to the next levels. So, the overall sentiment is  bearish on USD/JPY towards this release.

Technical levels, from top to bottom: 100, 98.90, 97.80, 96.71,  95.88 and 95.


5 Scenarios

  1. Within expectations: 0.0 to 6.0: In such a case, the yen is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 6.1 to 9.0: An unexpected higher reading can send USD/JPY above one resistance level.
  3. Well above expectations: Above 9.0: The chances of such a scenario are very low. The pair could break two or more resistance lines on such an outcome.
  4. Below expectations: -3.0 to -0.1: A reading in negative territory could push USD/JPY downwards, and one support level could be broken as a result.
  5. Well below expectations: Below -3.0: A very weak reading would signal worsening conditions in the manufacturing sector. In this scenario, the pair could break two or more support levels.

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

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Kenny Fisher

Kenny Fisher

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.