Forex Signal (Mon January 3 2011, 10:00am NY Time EST) - US ISM Manufacturing PMI

Henry Liu

Former FPA Special Consultant
ISM or Institute for Supply Management is releasing its PMI (Purchasing Manager Index) today. 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 57.0 Previous 56.6

The Trade Plan

We’ll be looking for around 2.5 points of deviation for this trade. If a 59.5 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 54.5 figure is released, expect to see weaker USD in the short term, therefore we should BUY GBPUSD (or EURUSD).

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 or EURUSD. I’ll also be looking to trade other JPY crosses as they may all exhibit similar movements using my Retracement Trading Method.
Henry's News Trading Method

The Market
U.S. ISM Manufacturing PMI current expectation is way above the medium 50 level at 57.0, and this release is considered as expansion in the manufacturing 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. However, in a week such as this week, with NFP scheduled on Friday, PMI's usually would have more market impact.

And of course, as the first significant U.S. economic indicator for the year, market may react with a bit more exaggeration, therefore it is probably the best to wait until after this release before jumping into the market.

Additional Thought
With Bank Holidays for New Zealand, Australia, Japan, Switzerland, France, German, UK, Canada, etc... we may not get much of market volatility today. Therefore, unless we get a strong release, stay out of the market.

Pre-news Consideration
Since PMI's are not trend changing releases, there should be no overwhelming sentiment prior to the release.

“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 & Data US ISM Manufacturing PMI


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Hi Henry, thanks for the signals

I have been trading technically for quite a while with success, and feel I need to take it to the next level and increase my probabilities by adding fundamentals to my current strategy as well.