USD/JPY: Trading the US Non-Manufacturing PMI

The  US Non-Manufacturing PMI is   based on a survey of purchasing managers  in sectors other than  manufacturing. 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 Tuesday 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 Non-Manufacturing PMI came in at 53.5 points in May, below the estimate which stood at 55.5. This was also a four-month low for the index. The forecast for June is almost  unchanged, with a  prediction of 53.7.  Will the index meet or beat the forecast  this month?  

Sentiments and levels

 Intervention by the BOJ seems unlikely at this point. The central bank appears to be too weak to have much impact in light of the current events, which are quite dramatic. The immense stress around Spain and also the loss of momentum in the US drive money to the “safety” of the yen, despite the huge Japanese debt. Thus, the overall sentiment is  neutral on JPY/USD towards this release.

Technical levels, from top to bottom: 80.20, 80, 79.60, 78.30, 77.50 and 77.

 

5 Scenarios

1. Within expectations: 51.0 to 57.0: In such a case, JPY/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 57.1 to 60.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 60.0: 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:  48.0 to 50.9: A sharper decrease than forecast could  push  USD/JPY downwards  and break  one level of support.
5. Well below expectations: Below 48.0: Such an outcome 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.