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The US Manufacturing PMI is based on a survey of purchasing managers in the manufacturing sector. Respondents are surveyed for their view of the economic 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 Monday at 14:00 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends.

The Manufacturing PMI came in at 53.5 points in May,slightly below the estimate of 54.0. The markets are forecasting a dip in  July, with a prediction of 52.1 points. Will the index meet or beat this month’s forecast?

Sentiments and levels

The  EU Summit injected some unexpected enthusiasm  and optimism in the  markets, after the unexpected announcement about measures to combat the debt crisis and  provide direct help to beleaguered banks. However, there are holes in the EU Statement, and the deep-rooted problems in the zone will not recede anytime soon. Given the the absence of QE3 in the US, we could see a gradual rise by USD/JPY. Thus, the overall sentiment is neutral on JPY/USD towards this release.

Technical levels, from top to bottom: 81.43, 80.20, 80, 79.70, 79.10 and 78.30.

5 Scenarios

  1. Within expectations:  49.0 to 55.0: In such a case, JPY/USD is likely to rise within range, with  a small chance of breaking higher.
  2. Above expectations: 55.1 to 58.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above   expectations: Above 58.0: The likelihood of a sharp expansion is low. Such an outcome would push the pair upwards, and a second resistance line might be broken as a result.
  4. Below expectations:  58.1 to 61.0: A sharper decrease than forecast could push USD/JPY downwards and break one level of support.
  5. Well below  expectations: Below 48.0:  This scenario  would indicate  substantial contraction in the manufacturing sector. This would likely push the pair down, possibly breaking a second support level.

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