Forex Signal (Tuesday September 6, 2011 - 10:00am EDT) - US ISM Non-Manufacturing PMI

Stavro D'Amore

Former FPA Special Consultant

Today we have the following trade plan:

US ISM Non-Manufacturing PMI
Forecast 51.0
Previous 52.7
Pair to trade:
Triggers we need: 54.0 BUY USDJPY / 48.0 BUY EURUSD

Economical Impact: High
Typical Result: Actual forecast is good for the currency
Occurrence: Released monthly, on the third business day after the month ends
Spike Probability: Good, we can see 30 pip spike

About our Triggers:
Current forecast is 51.0. We'll be using deviation of 3 points in order to BUY or SELL USD. In the event that 54.0 is reached, we could see some USD strength and JPY weakness. Therefore you could BUY USD/JPY; however, if the opposite is true and a figure of 48.0 is released, expect to see stronger EUR and i will be buying EUR/USD pair

If our tradable releases are reached, there is a good expectation that the market will move 50 pips within the next 2 hours on both USD/JPY and EUR/USD pairs

What is it? And why does the market care?
It's a leading indicator of economic health and businesses both global and local businesses will react quickly to market conditions. A Higher deviation means industry expansion, lower deviations indicates a significant contraction in the economy. It is derived by a survey of about 400 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries and inventories

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

Prior to the release (2-3 mins) I will be looking for a short term long position in EUR/USD and I will get out of this trade 30 seconds before the actual release or any spreads that should widen.

I'd recommend spike trading as the best option when there is great uncertainty in the markets; also the liquidity is very good at the moment if you’re using an ECN broker.

I will look for a 35% retracement in the original spike before entering a trade; 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 entry price. My TP level would be Just before a resistance level or if the chart decides to form a level looking at a 15 min time frame. If my triggers are hit I will defiantly try to run this for over 120 minutes depending on current market volume, to do this I will look for a choppy volume (if you’re using MT4 you would look for the volume bar tab).

Historical Chart and Data for US ISM Non-Manufacturing PMI

All the best

Stavro D’Amore
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thanks for the analysis provided here but there is a sudden spike in the EU/USD pair at 4am from low 1.4106 to high 1.4285 a spike of technical conlidation of 180pips

I am wondering if the current news will still be valid on the matter above or the news already broke