Forex Signal (Monday October 3, 2011 – 10:00am EDT) – US ISM Manufacturing PMI

Stavro D'Amore

Former FPA Special Consultant

Please see my trade plan below:

US ISM Manufacturing PMI
Forecast 53.0
Previous 53.4
Pair to trade: USD/JPY and EUR/USD

Numbers we need:
BUY USD/JPY 55 or higher
BUY EUR/USD 51 or lower

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Economic Impact: High
Typical Result: Good for Currency
Occurrence: monthly, on the first business day after the month ends
Spike Probability: Good, we can see 45 pips on initial spike

About our Triggers:
US ISM Manufacturing Index forecasted to arrive at 53.0
we are looking for a deviation of 2K either way on this trade.
If we get 55 or better I will look to enter a LONG position on USD/JPY and if we get
51 or lower deviation I will go LONG on EUR/USD.
Should this report be triggered, we can expect to see about 45 pips on the initial spike on both pairs USD/JPY and EUR/USD. We have no known conflict for this release. This trade will have a good chance of a 30% retrace on the initial spike.

What is it? And why does the market care?
This data is considered a very important and trusted economic measure. If the index has a value below 50, due to a decrease in activity, it tends to indicate an economic recession, especially if the trend continues over several months. A value substantially above 50 likely indicates a time of economic growth. The ISM index is the result of a monthly survey of over 400 companies in 20 industries throughout the 50 states.
The ISM's leading quality has been proven over time. During a recession, the ISM's bottom may precede the turning point for the economic cycle by some months.

A higher than expected reading should be taken as positive/bullish for the USD,
A lower than expected reading should be taken as negative/bearish for the USD.

Method I use to trade this:
Stavro D’Amore Trading Method

I do recommend spike trading as an option. Liquidity is very good at the moment if you are using an ECN broker. Please use no more than a 15 pip limit order to control slippage.

I will look for a 30% retracement in the original spike before entering. I will be looking at a 5 minute chart. I will sell half my position as soon as I hit the original high point of the first initial spike and place a SL at the original spike price.

My TP level would be just before a resistance level or if the chart decides to form a support level, looking at a 15 minute chart time frame to analyze this.

All the best

Stavro D’Amore
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