USD/JPY: Trading the ISM Non-Manufacturing PMI

5 July 2016, 17:49
Sherif Hasan
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The ISM Non-Manufacturing PMI (Purchasing Managers’ Index) is based on a survey of purchasing managers in 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 14:00 GMT.

Indicator Background

The views of purchase managers on the economy are always important, 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.

The ISM Non-Manufacturing PMI continues to point to expansion in the services sectors, with readings above the 50-point level. The index slipped to 52.9 points, in May well short of the forecast of 55.4 points. The estimate for June stands at 53.3 points.

Sentiments and levels

The BoJ may be out of monetary ammunition, unable to provide easing to kick-start the weak economy. This means that the yen could move higher. As well, further Brexit aftershocks could boost the safe-haven Japanese currency. So, the overall sentiment is bullish on USD/JPY towards this release.

Technical levels, from top to bottom: 104.25, 102.80, 101.51, 100.54, 99.71 and 98.88

5 Scenarios

  1. Within expectations: 50.0 to 57.0: In such a case, USD/JPY is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 57.1 to 61.0: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 61.0: A sharp expansion in the services sector could push USD/JPY upwards, and a second resistance line might be broken as a result.
  4. Below expectations: 46.0 to 49.9: In this scenario, USD/JPY could drop and break one level of support.
  5. Well below expectations: Below 46.0: A very weak reading would point to sharp contraction. This would likely push the pair downwards, possibly breaking a second support level.
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