Profit Mongers @ 8:04 AM, Thursday December 01 2011
1000 US ISM Manufacturing Index (51.8 expected, 50.8 prior, 50.2 to 53.0 range)
Affliated Reports:
US ISM Prices Paid (45.0 expected, 41.0 prior, 43.0 to 52.0 range)
Last month a -1.2* deviation cause only a tiny blip down on USDJPY which then went on to
go rally over the next hour or so. CADJPY did similar and was up 50 pips in the next 35
minutes after the release. Hoowever this was too small of a deviation for us and we always
look for a bigger deviation to trade this one. Why is PMI so much more sensitive for the
UK than the US or indeed Germany? Not sure, anyhow we wait for a deviation which is more
likely to work. At least luckily last month despite the lower print it was able to hold
above the critical contraction/expansion figure of 50. In October it came out with a small
+1.1 deviation, and in this case there was a small pop up but the USDJPY fell about 15 min.
later. September had a better +2.1 deviation and here we did see a nice rally. It was
expected at 48.5 which is below the 50 level, so it was good news that it was able to print
above this and keep in the expansion zone, however so slightly. USDJPY spiked 17 pip pulled
back after 3 minutes but then continued higher for a 35 pip move over a half hour. CADJPY
had a nicer spike over nearly 40 pips but did not have the same follow thru as the USDJPY
did over the next half hour, and just went choppy sidewise. So perhaps we could trade a
+/-2.1 deviation but it seems that this reaction was mostly due to the fact that the print
managed to stay above 50. A safer deviation is +/-3.5, however the lower trigger could be
tightened a bit so if we print below 50 things should sell off. So I would go with a -2.3
for the sell and a +3.2 for the buy. You can try the yen crosses for the spike, such as
CADJPY or of course the Emini.
if 55.0 or higher then buy USDJPY for a potential 20-40 pip move
if 49.5 or lower then sell USDJPY for a potential 20-40 pip move
*FPA has got their numbers messed up - source Bloomberg
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