Brocker.Org: Upbeat ISM Non-Manufacturing Survey to Undermine EUR/USD Resilience

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ISM Non-Manufacturing Survey to Rebound to 55.8 in April..

Employment Component Slipped to 51.6 in March- Lowest Since August 2016.

Trading the News: U.S. ISM Non-Manufacturing Survey

ISM Non-Manufacturing

Even though the Federal Open Market Committee’s (FOMC) looming interest rate decision takes center stage, a material pickup in the ISM Non-Manufacturing survey may undermine the recent resilience in EUR/USD should the report highlight an improved outlook for the U.S. economy.

Why Is This Event Important:

Signs of stronger serviced-based activity may heighten the appeal of the U.S. dollar as it puts pressure on the FOMC to raise the benchmark interest rate sooner rather than later, and the central bank may lay out a more detailed strategy over the coming months as officials look to unload the balance sheet later this year or in early 2018. In turn, a rebound to 55.8 or higher may encourage a bullish reaction in the greenback, but another below-forecast print may prop up EUR/USD as it drags on interest-rate expectations.

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Impact that the ISM Non-Manufacturing survey has had on EUR/USD during the previous print

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

MAR

2017

04/05/2017 14:00 GMT

57.0

55.2

-2

-2

March 2017 ISM Non-Manufacturing

EUR/USD 5-Minute

EUR/USD Chart

The ISM Non-Manufacturing survey narrowed more-than-expected in March, with the index slipping to 55.2 from 57.6 the month prior. A deeper look at the report showed the gauge for New Orders softened to 58.9 from 61.2 in February, with the Employment component declining to 51.6 from 55.2 during the same period, while New Export Orders advanced to 62.5 from 57.0. The mixed data prints spurred a lackluster reaction in EUR/USD, with the pair consolidating throughout the North American trade to end the day at 1.0662.

How To Trade This Event Risk(Video)

Bullish USD Trade: ISM Non-Manufacturing Survey Climbs to 55.8 or Higher

  • Need a red, five-minute candle following the ISM survey to consider a short EUR/USD trade.
  • If market reaction favors a bullish dollar position, sell EUR/USD with two separate lots.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: Gauge for U.S Service-Based Activity Continues to Disappoint

  • Need a green, five-minute EUR/USD candle to favor a short dollar position.
  • Carry out the same setup as the bullish dollar trade, just in reverse.

Potential Price Targets For The Release

EUR/USD Daily

EUR/USD Daily Chart

Chart – Created Using Trading View

  • The breakout in EUR/USD appears to be losing momentum as the pair struggles to clear the March high (1.0951), while the Relative Strength Index (RSI) struggles to preserve the bullish formation carried over from the previous month and appears to turning around of overbought territory; may see a more meaningful attempt to fill-in the gap following the first round of the French election, with the first downside region of interest coming in around 1.0780 (100% expansion) to 1.0790 (38.2% expansion).
  • Keep in mind the broader outlook for the euro-dollar exchange rate has become less bearish as it clears the downward trend from 2016, with price & the RSI extending the bullish formations from earlier this year.
  • Interim Resistance: 1.1140 (23.6% expansion) to 1.1160 (38.2% expansion)
  • Interim Support: 1.0470 (38.2% expansion) to 1.0500 (50% expansion)

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— Written by David Song, Currency Analyst

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