Tuesday, July 5, 2011

US ISM Non-Manufacturing PMI - July 6, 2011

ISM or Institute for Supply Management is releasing its PMI (Purchasing Manager Index) and its similar to the UK Services PMI as this release is targeting the services sectors. As a leading indicator, traders generally pay attention to this report for hints of economic trend.


10:00am NY Time US ISM NonManufact. PMI Forecast 54.0 Previous 54.6
ACTION: 56.5 BUY USDJPY / 51.5 BUY EURUSD 


Trade Plan


U.S. ISM Non-Manufacturing PMI is better known as the U.S. Services PMI; the current expectation is above the 50 level at 54. This figure indicates an expansion in the services sector where 50 is the medium point for the PMI. We’ll be using a deviation of 2.5 points in order to BUY or SELL USD. In the event that 56.5 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 51.5 is released, expect to see stronger EUR and possibly another strong sentiment for the USD.

If our tradable releases are reached, there is a good expectation that the market will move 50 pips within the next 120 minutes on both USD/JPY and GBP/USD.

I’ll be using my retracement trading method for this release.

The Market

The ISM non manufacturing PMI is a leading indicator as stated before, and usually doesnt affect the long-term trend of the market unless we get a huge surprise. The services sector is expecting a confident release that shows continual expansion, but at a lagging rate.

The recent Manufacturing PMI showed a surprise increase in Manufacturing activities, and if that is of any indication, the Non-Manufacturing reading could also follow trend, providing a picture of balanced recovery for U.S. economy.

Additional Thoughts


Nevertheless, market will be paying attention to the ISM Non-Manufacturing PMI as the majority of U.S´ work force is service related (around 90%?). Therefore a strong release in either direction will shift the current speculation of USD.

Pre-news Considerations

There are no pre-news trades for this release.

DEFINITION:


The Institute of Supply Management (ISM) Non-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.


Thanks,





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