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

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The ISM Non-Manufacturing PMI (Purchasing Managers’ Index) is based on a survey of purchasing managers, excluding 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.

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

Published on Wednesday 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 very important and an unexpected reading could affect the movement of USD/JPY.

Recent releases have been in the mid-50 point range, indicating respectable economic growth. The November reading came in at 54.2, just below the estimate of 54.6. The forecast for December is down slightly, with an estimate of 53.6.

Sentiments and levels

We can expect another week of consolidation by USD/JPY as the elections in Japan are not close enough. On the one hand, Japanese officials continue to talk down the yen. On the other hand, serious disagreements in Washington regarding the fiscal cliff crisis could push investors away from risk, which helps the yen more than the dollar. While US GDP was revised to the upside, there are 4 worrying signs why this growth isn’t that good. So, the overall sentiment is neutral on JPY/USD towards this release.

Technical levels, from top to bottom: 84.20, 83.34, 82.87, 81.80, 81.43 and 80.70.

5 Scenarios

  1. Within expectations: 50.0 to 58.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 58.1 to 62.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 62.0: A sharp jump by the index could push USD/JPY upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 46.0 to 49.9: A weak reading could push USD/JPY downwards and break one level of support.
  5. Well below expectations: Below 46.0: A sharp contraction by the index would indicate more contraction in the US economy. 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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About Author

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.