Monday, August 1, 2011

US ISM Manufacturing PMI (Purchasing Managers Index) Data Release














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 55.0 Previous 53.0

ACTION: 57.5 BUY USDJPY / 52.0 BUY EURUSD

Trade Plan

We´ll 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 USD strength and JPY weakness, thererefore a BUY on the USD/JPY. If the opposite is true, or 52.5 figure is released, expect to see weaker USD in the short term, therefore we should BUY 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 Liu´s Trading Method

The Market

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, with that being said, since last month’s surprise better than expected release, market is surely seeing that the manufacturing sector in the US has picked up steam somewhat.

If we do get a strong release, it could be the catalyst for USDJPY to soar.  With global manufacturing rebounding, we are more likely to see a better number than not.

Additional Thoughts

We´ll trade this release following our trading plan as stated above... Remember this is a leading indicator, the period that it focuses is for this month, therefore on a positive surprise, traders could speculate on better employment data for next Friday...

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.

Thanks,