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Forex Signal (Monday August 1, 2011, 10:00am NY Time EDT) - US ISM Manufacturing PMI

Discussion in 'Current Forex Trading Signals' started by Stavro D'Amore, Jul 31, 2011.

  1. Stavro D'Amore

    Stavro D'Amore Former FPA Special Consultant

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    ISM (Institute for Supply Management) is releasing its PMI (Purchasing Manager Index) today. As a leading indicator, traders generally pay attention to this report for an economic trend.

    Here is the forecast:

    10:00am NY Time US ISM Manufacturing PMI Forecast 55.0 Previous 55.3
    ACTION: 57.5 BUY USDJPY / Sell USDJPY 52.5.


    Trade Plan
    We will be looking for around 2.5 points of deviation for this trade. If a 57.5 or better number is released, we could see some short term USD strength and this is what the US dollar needs in the short term. If the opposite shall occur, or 52.5.figure is released, expect to see USDJPY have significant spike of 25 pips.

    If our tradable deviations are released, there is a good expectation of 50 pips of market movement within the first 60 minutes (after news release) on the USD. I will be looking to use USDJPY as it currently has greater liquidity and depth, whilst the EURUSD has a lot of uncertainty.

    The Market
    ISM PMI's are leading indicators as previously stated. A positive number indicates industry expansion, a lower than forecasted number indicates contraction and a slowdown in the economy. Usually, this release does not affect the long-term trend of the market, unless we get a huge surprise; however it will provide some sort of depth for NFP.

    Yet, ISM Manufacturing should report solid expansion for May, but at a slower pace. The manufacturing report accounts for 12% of economic output and the strong demand for U.S. exports should continue on a progressive pattern. Manufacturing rate production will indicate that bad weather conditions across the Pacific, as well as high energy costs are rippling through the U.S.

    Additional Thoughts
    With the possibility of a weak USD, this may be a short comeback that the USD needs. This is the first real data that would provide insight towards the NFP on Friday, therefore on a strong surprise the market may move strongly.

    Pre-news Considerations
    There are no pre-news trades for this 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 for US ISM Manufacturing PMI

    All The best
    Stavro D’Amore
     
    #1 Stavro D'Amore, Jul 31, 2011
    Lasted edited by : Sep 8, 2016
  2. digamer

    digamer Private, 1st Class

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    Pair of choice

    Stavro, could you, or may be someone else, please explain the choice of usdjpy over usdchf. Many times I have observed much more certain (less hesitant) and stronger action on usdchf during US-news. For instance, last week's US Advance GDP q/q...the beginning of usdjpy spike was quite hesitant and after 20 minutes: usdjpy down 38 pips, while usdchf 97 pips respectively.

    There must be a very good reason why usdchf is so rarely (almost never) mentioned as a pair of choice for USD-news? Henry Liu, as I remember, never mentioned this pair as an alternative.

    EDIT: and again today...US ISM Manufacturing PMI, 25pips down during first 5min on usdjpy, while on usdchf 50pips down.
     
    #2 digamer, Aug 1, 2011
    Last edited: Aug 1, 2011
  3. Stavro D'Amore

    Stavro D'Amore Former FPA Special Consultant

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    Liquidity in USD/JPY is much greater than USD/CHF, You can use use USD/CHF they both correlate the same way buyt form personal experience USD/JPY is much more liquid.
     

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