- U.S. ISM Non-Manufacturing Survey to Uptick for Sixth Time in Last 12-Months.
- Employment Component Slowed to 55.0 in November from 59.2 the Month Prior.
For more updates, sign up for David's e-mail distribution list.
Trading the News: U.S. ISM Non-Manufacturing
A pickup in the ISM Non-Manufacturing survey may boost the appeal of the greenback and spur a further decline in EUR/USD as it raises the Federal Reserve’s scope to implement higher borrowing-costs in 2016.
What’s Expected:
Click Here for the DailyFX Calendar
Why Is This Event Important:
With the U.S. economy approaching full-employment, signs of a stronger recovery may encourage the Federal Open Market Committee (FOMC) to adopt a more hawkish tone over the coming months especially as Chair Janet Yellen anticipates the region to achieve the 2% inflation target over the policy horizon.
Expectations: Bullish Argument/Scenario
Release | Expected | Actual |
Consumer Confidence (DEC) | 93.5 | 96.5 |
Gross Domestic Product (QoQ) (Annualized) (3Q F) | 1.9% | 2.0% |
Building Permits (NOV) | -1.0% | 11.0% |
Improved confidence accompanied by the expansion in private-sector activity may generate a strong ISM print, and a positive development may spur increased demand for the dollar as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
Release | Expected | Actual |
Advance Retail Sales (MoM) (NOV) | 0.3% | 0.2% |
Wholesale Trade Sales (MoM) (OCT) | 0.2% | 0.0% |
Consumer Credit (OCT) | $20.000B | $15.982B |
However, the slowdown private-sector lending paired with the ongoing slack in household consumption may drag on service-based activity, and an unexpected dip in the survey may prompt the Fed to endorse a wait-and-see approach at the January 27 interest rate decision as the committee largely looks for evidence of stronger inflation.
How To Trade This Event Risk(Video)
Bullish USD Trade: ISM Non-Manufacturing Advances to 56.0 or Higher
- Need red, five-minute candle following the ISM print to consider a short trade on EUR/USD.
- If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position.
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
- Move stop to entry on remaining position once initial target is hit; set reasonable limit.
Bearish USD Trade: U.S. Service-Based Activity Unexpectedly Slows
- Need green, five-minute candle to favor a long EUR/USD trade.
- Implement same setup as the bullish dollar trade, just in the opposite direction.
Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!
Potential Price Targets For The Release
EURUSD Daily
Chart - Created Using FXCM Marketscope 2.0
- EUR/USD may continue to give back the advance following the ECB’s December meeting as it fails to hold above the 1.0800 handle (50% expansion), with a close below 1.0730 (78.6% retracement) raising the risk for a run at the December low (1.0516).
- DailyFX Speculative Sentiment Index (SSI)shows the retail crowd has flipped net-long EUR/USD ahead of the ISM Non-Manufacturing survey, with the ratio climbing to +1.11 as 53% of traders are now long.
- Interim Resistance: 1.1052 (November high) to 1.1090 (50% retracement)
- Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)
Impact that the U.S. ISM Non-Manufacturing has had on EUR/USD during the previous month
Period | Data Released | Estimate | Actual | Pips Change (1 Hour post event ) | Pips Change (End of Day post event) |
NOV 2015 | 12/03/2015 15:00 GMT | 58.0 | 55.9K | +8 | +98 |
November 2015 U.S. Non-Farm Payrolls
The U.S. ISM Non-Manufacturing survey failed to meet market expectations in November, with the index slipping to a 6-month low of 55.9 from 59.1 the month prior. A deeper look at report a slowdown inNew Orders and New Export Orders along with a downtick in the Employment component, while gauge for Prices Paid expanded for the first time since August. Despite the weaker-than-expected print, the Federal Reserve may continue to prepare U.S. households and businesses for higher borrowing-costs as Chair Janet Yellen remains upbeat on the economy. Nevertheless, the greenback struggled to hold its ground following the release, with EUR/USD rising above the 1.0900 handle and closing the day at 1.0937.
Read More:
Price & Time: EURUSD - Still In No Man’s Land
China Securities Regulator Guarantees No Extended Sell-off in January
Bearish NZDUSD As Double-Topping Pattern Develops on Divergence Into 200-DMA
Trading Opportunities of 2016: Key Currency Crosses to Watch amid the Diverging Paths for Monetary Policy
--- Written by David Song, Currency Analyst and Shuyang Ren
To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.
To be added to David's e-mail distribution list, please follow this link.
Trade Alongsidethe DailyFX Team on DailyFX on Demand
original source
