USD/JPY Rebounds as ISM Manufacturing Hits 30-month High

DailyFX

Talking Points:

- Strongest ISM headline since April 2011.

- Best Employment reading in 2013.

- Prices paid alleviate slowing inflation concerns.

= USDJPY BULLISH

Manufacturing activity in the United States is growing at a faster pace, according to the September ISM Manufacturing survey. The index perked up to a 30-month high in September, with the Employment subindex notably showing a sizeable advance, which bodes well for incoming US labor market data (although the ISM Services Employment subindex is more representative of the economy).

A dearth of economic data midsummer led to the Federal Reserve’s decision not to taper QE3 at its September policy meeting, but these data prints offer a positive observation of the US economy that should help push the FOMC to wind down its expansive stimulus efforts. However, the scope for a QE3 taper amid a rebound in economic data, like today’s ISM Manufacturing survey, may be limited in light of continued political deadlock in Washington, D.C.

Here’s the data helping the US Dollar:

- ISM Manufacturing (SEP): 56.2 versus 55.0 expected, from 55.7

- ISM Price Paid (SEP): 56.5 versus 55.0 expected, from 54.0

- ISM Employment (SEP): 55.4 from 53.3

USDJPY 1-minute Chart: October 1, 2013

View photo

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USDJPY_Rebounds_as_ISM_Manufacturing_Hits_30-month_High_body_USDJPY0.jpg, USD/JPY Rebounds as ISM Manufacturing Hits 30-month High

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the data, the USDJPY rallied from ¥98.10 to as high as 98.29, and has since maintained most of its gains after a brief dip back to 98.04. At the time this report was written, the pair had rebounded to 98.22 and was seen pushing higher alongside the other Yen-crosses (xxx/JPY) as risk-appetite firmed across asset classes.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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