US ISM NON-MANUFACTURING PMI

NEWS TRADING
Wednesday April 4, 2012


[10:00am NY Time]


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 57.0 Previous 57.3
ACTION: 59.0 BUY USDJPY  / 53.0 BUY EURUSD


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.


Trade PlanU.S. ISM Non-Manufacturing PMI is better known as the U.S. Services PMI; the current expectation is above the 50 level at 57.0. 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 around 2 points in order to BUY USD and 4.0 points in order SELL USD. In the event that 59.0 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 53.0 is released, expect to see stronger EUR and weaker 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 EUR/USD.


The MarketThe 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 positive release (57) that shows the purchase managers in services sector expect to see continuing expansion for the month of April.
With the recent Manufacturing PMI showing a better than expected release, especially with an Employment Component of 56.1 reading, I believe today’s PMI will also be at least inline or slightly better than expected… and considering the upcoming NFP on Friday, if we get a strong release today, risk sentiment should be dominating the Forex and broader markets alike.

Additional ThoughtsMarket usually pays 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

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