Henry Liu
Former FPA Special Consultant
- Messages
- 473
ISM or Institute for Supply Management is releasing its PMI (Purchasing Manager Index) and it is similar to the UK Manufacturing PMI as this release is targeting the manufacturing sectors. As a leading indicator, traders generally pay attention to this report for hints of economic trend. Here’s the forecast:
10:00am NY Time US ISM Manufacturing PMI Forecast 54.2 Previous 56.2
ACTION: USD/JPY BUY 57.0 SELL 51.5 USD/JPY
The Trade Plan
We'll be looking for 2.5 points of deviation for this trade. If a 57.0 or better number is released, we could see some USD strength and JPY weakness, thererefore a BUY on the USD/JPY. If the opposite is true, or 51.5 figure is released, expect to see stronger JPY and possibly another strong risk aversion driven market, as at this stage a decline in future sentiment should provide reason for traders to sell USD.
If our tradable releases are reached, there is a good expectation of 50 pips of market movement within the next 60 minutes on USD/JPY. I’ll be looking to trade USD/JPY or other JPY crosses as they may all exhibit similar movements using my Retracement Trading Method.
For more information on my trading methods:
Henry's Retracement Trading Method
The Market
U.S. ISM Manufacturing PMI current expectation is above the 50 level at 54.2, as 50 is considered the medium point for the PMI’s, this release is considered as expansion in the services sector. ISM PMI’s are leading indicator as stated before, and usually they do not affect the long-term trend of the market, unless we get a huge surprise. If the release is below 50, it would be considered a huge surprise, and we should expect some heavy selling in the USD as the US economic outlook disappoints the market once again.
With general bearish sentiment on USD coming into this week and on the back of another month of NFP negative releases, sentiment should remain pretty low for the USD; however, USD/JPY may be the only pair that could justify for a rebound as we are at historical support levels... see my Upcoming Overview for more details.
Additional Thought
As stated before, the 50 level is crucial for this release, I'd be looking to take a SELL on USD/JPY, perhaps immediately after the release if we get a 49.8 or something worse... You could trade EUR/USD (LONG) or GBP/USD (LONG) instead of USD/JPY, I believe the potential on GBP/USD may actually be better in the event of a below 50 release.
Since NY traders will be waiting for this release to be out of the way before committing to a position, volatility may be high but there is no way to predict the direction... Therefore unless we get our tradable release, we should stay out...
Pre-market Consideration
As mentioned in the previous analysis, PMIs don't change the long-term trend of the market, therefore we should not trust any pre-market movement prior to the release...
DEFINITION
“The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation’s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.”
Historical chart and data on US ISM Manufacturing PMI.
Thanks,
10:00am NY Time US ISM Manufacturing PMI Forecast 54.2 Previous 56.2
ACTION: USD/JPY BUY 57.0 SELL 51.5 USD/JPY
The Trade Plan
We'll be looking for 2.5 points of deviation for this trade. If a 57.0 or better number is released, we could see some USD strength and JPY weakness, thererefore a BUY on the USD/JPY. If the opposite is true, or 51.5 figure is released, expect to see stronger JPY and possibly another strong risk aversion driven market, as at this stage a decline in future sentiment should provide reason for traders to sell USD.
If our tradable releases are reached, there is a good expectation of 50 pips of market movement within the next 60 minutes on USD/JPY. I’ll be looking to trade USD/JPY or other JPY crosses as they may all exhibit similar movements using my Retracement Trading Method.
For more information on my trading methods:
Henry's Retracement Trading Method
The Market
U.S. ISM Manufacturing PMI current expectation is above the 50 level at 54.2, as 50 is considered the medium point for the PMI’s, this release is considered as expansion in the services sector. ISM PMI’s are leading indicator as stated before, and usually they do not affect the long-term trend of the market, unless we get a huge surprise. If the release is below 50, it would be considered a huge surprise, and we should expect some heavy selling in the USD as the US economic outlook disappoints the market once again.
With general bearish sentiment on USD coming into this week and on the back of another month of NFP negative releases, sentiment should remain pretty low for the USD; however, USD/JPY may be the only pair that could justify for a rebound as we are at historical support levels... see my Upcoming Overview for more details.
Additional Thought
As stated before, the 50 level is crucial for this release, I'd be looking to take a SELL on USD/JPY, perhaps immediately after the release if we get a 49.8 or something worse... You could trade EUR/USD (LONG) or GBP/USD (LONG) instead of USD/JPY, I believe the potential on GBP/USD may actually be better in the event of a below 50 release.
Since NY traders will be waiting for this release to be out of the way before committing to a position, volatility may be high but there is no way to predict the direction... Therefore unless we get our tradable release, we should stay out...
Pre-market Consideration
As mentioned in the previous analysis, PMIs don't change the long-term trend of the market, therefore we should not trust any pre-market movement prior to the release...
DEFINITION
“The Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation’s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.”
Historical chart and data on US ISM Manufacturing PMI.
Thanks,
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