Trade Example: How to trade ISM Manufacturing PMI data

Trade Example: How to trade ISM Manufacturing PMI data


(logo swooshes) – [Jarratt] In this video
we’re gonna demonstrate how Forex Source subscribers made money trading a sentiment shift
involving the weaker than expected manufacturing data from the US this week. Now the move we’re gonna be
looking at is this one here. This is on the US Dollar
versus the Japanese Yen. So what we’re gonna do is break this down and see how you could have
predicted and caught this move using our market commentary. Just before I begin, don’t
forget to hit that button to subscribe or follow so
that you’ll be notified every time we release a new video. So first of all, we need
to understand the context or the baseline surrounding this pair, the US Dollar versus
the Yen, Japanese Yen, before the move took place. Now to to do that we’re
gonna go to this post on October 1st, which of course
was the day of the event. This was posted an hour before the ISM manufacturing PMI was released. And now generally this report, and the other thing is the
reason why did a whole a report is because on this occasion
the manufacturing data from the US was actually pretty important and the markets are watching
very, very closely basically, because if you read all of
this report basically it says that the market doesn’t
expect it to be negative, it expected to remain firm and positive. But obviously this will give us clues to the strength of the US economy. However, there’s a little
interesting bit down here. It’s the impact on the FED. If for whatever reason we
did get a poor reading, this would raise concerns
with FOMC members that have constantly said
they are data dependent. So we got an October
FED meeting coming up, there’s a 39% chance of the FED cutting, however, there’s a lot of the FED members that are on the fence and basically, the reason why this
whole report was made is if manufacturing started to
show signs of a recession, this would pull FED members off the fence on the side of a cut, which would make a rate
cut much more likely. This is the big reason
why this was a focal point and of course, this would create a huge sentiment shift in the market. So once we’ve got that, we
obviously got the baseline, we need to identify the kind
of type of breaking news that would generate the
biggest market moving shit in this example because it
was all revolving around a data point, it would
be a deviation negative. So if their manufacturing
PMI came out positive, that’s not really going to create a shift because everyone’s
kind of expecting that. Everyone kind of still has
faith in the US economy. However, if it’s negative
this is gonna put doubts creeping in and of course
you can see down here, this is may concern those FOMC members who had said they’re data dependent. So the negative reading
is the big sentiment shift and of course we got it here. 47.8, much worse than expected, much worse than even in the previous. So this is a pretty concerning report and of course that was also the trigger, that date of release was
the trigger on the calendar and this was the actual sentiment shift that we needed to take place. It actually happened. So lets take a quick
look on the charts here to see how this played out. Now we’re gonna go to a
five minute chart quickly and you can see this candle here, this is the 3 o’clock candle. This was when the data was released. Now obviously, you’re not
gonna be able to catch, when you’re trading your
data release like this you’re not gonna be able
to catch the move there, but the beauty of a sentiment
shift is it causes the shift, these things last for the whole session and even for a couple days after. That’s the beauty of a sentiment shift when you can identify them and so you don’t even need to
try and catch this one here, you just kind of wait a few minutes and you can see a couple more, a few more five minute candles and we highlighted the
10790 areas to try to get in when the move has kind of finished being volatile and played out, because from here the Dollar’s
only gonna go one way, because FED expectations
for a cut are gonna go up. The market’s going to become concerned it’s going to recession,
this is going to cause a negative shift, we
knew that ahead of time. And if we go to the 15 minute chart, you can see the Dollar
was only gonna go one way after that event and a couple days after and this move was over 100
pips on the Dollar/Yen. So if you’re interested
in learning more about how market commentary can
help you interpret news and fundamental analysis into
profitable trades like this, click the link below,
check out Forex Source and of course, thank you for watching. Please post your questions
or comments below this video, because we actually do read them all and we use those questions and comments to base our future videos on.

5 Replies to “Trade Example: How to trade ISM Manufacturing PMI data”

  1. But the question is why did you choose usdjpy why not others can you please make a video.

    which pair we should select against other to get benefit from news.

  2. I caught the move down. I placed USDJPY short few hours before announcement (trading into risk event). Book 180Pips on thursday when the pair further sinks during the ISM Non-Mfg PMI
    I have still an open position on USDJPY that I'm maintaining and would love to see more safe haven inflows to come this week.

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