TheNews

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

A slowdown in the ISM Non-Manufacturing survey may produce headwinds for the greenback and spur a near-term rally in EUR/USD as fears of a slowing recovery dampens bets for a Fed rate-hike in the first-half of 2016.

What’s Expected:



Why Is This Event Important:

Even though the Federal Open Market Committee (FOMC) appears to be on course to implement higher borrowing-costs, mixed data prints coming out of the U.S. may encourage the central bank to endorse a wait-and-see approach at the March 16 interest rate decision as the ongoing slack on the real economy undermines the Fed’s scope to achieve its 2% inflation target over the policy horizon.

Nevertheless, improved confidence accompanied by the pickup in the housing market may generate pickup in private-sector activity, and a stronger-than-expected ISM print may boost the appeal of the greenback as it reinforces Fed expectations for a consumption-driven recovery in 2016.

How To Trade This Event Risk
Bearish USD Trade: ISM Non-Manufacturing Slips to 55.2 or Lower

• Need green, five-minute candle following the ISM print to consider a long EUR/USD trade.
• If market reaction favors a bearish dollar trade, buy EUR/USD with two separate position.
• Set stop at the near-by swing low/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.

Bullish USD Trade: U.S. Service-Based Activity Unexpectedly Picks Up

• Need red, five-minute candle to favor a short EUR/USD trade.
• Implement same setup as the bearish dollar trade, just in the opposite direction.

Potential Price Targets For The Release
EURUSD Daily

• The diverging paths for monetary policy casts a long-term bearish outlook for EUR/USD, but the pair may attempt to break out of the triangle/wedge formation carried over from the previous month should the ISM report push market participants to push out bets for the next Fed rate-hike.
• 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)

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