ISM data is an important indicator for currency traders. It is used to determine the strength of the US economy. If the number is higher than expected, the US dollar moves higher against other currencies. If the number is lower, the dollar weakens. If the number is equal to expectations, traders may take a neutral position.
The Institute for Supply Management (ISM) is a nonprofit organization founded in 1915 and now serves over 40,000 business professionals in 90 countries. Their members represent a wide variety of industries, including manufacturing, which is one of the major reasons why their data is important to Forex traders. The Institute for Supply Management publishes its reports on its website.
Forex traders are keenly aware of ISM data because it affects interest rates. Since interest rates drive the exchange rate, a change in interest rates can help determine whether a currency will move in the future. Forex traders track these changes through their economic calendar and a reliable news source. The information can be useful in determining whether a country’s economy is expanding or contracting.
There are three major surveys conducted by the ISM. The first one, the manufacturing PMI, is based on surveys of 400 purchasing managers in the manufacturing industry. The second and third surveys, meanwhile, measure service sector activities. The release of these data helps forex traders make informed trading decisions.
ISM Manufacturing Index and PMI for Forex Trading
The Institute for Supply Management releases data every month to determine the health of the economy. Its surveys cover manufacturing, construction, and service sectors. The Institute collects survey data from 400 purchasing managers in each of these industries and releases its findings on the second or third business day of the month. In addition to monthly data, the Institute releases construction and services purchasing manager index (PMI) reports that avail of a detailed look into the health of the construction and service industries.
ISM manufacturing index
Forex traders often use ISM manufacturing index data to determine future market direction. A higher ISM number means a strengthening economy. A lower ISM indicates a weaker economy. When the ISM shows a positive trend, traders buy the dollar and sell the Euro. If the ISM shows a negative trend, traders sell the dollar and buy Euros. If the ISM reading is equal to or below the forecast, traders take a neutral position.
The ISM is one of the most widely followed and respected sources of economic data. Its data is reliable, coming from reputable industry professionals in over 300 countries. Its data is released monthly and offers forex traders unique opportunities for forex trading.
ISM construction index
The ISM construction index is a useful indicator of construction activity in the United States. It is compiled from surveys of purchasing managers in the manufacturing, construction, and services sectors. This data is released monthly and provides valuable information on the health of the US economy. The survey results are based on the opinions of more than 400 purchasing managers in five different industries.
This report does provide a comprehensive landscape of the state of the economy, which is vital to forex trading. Traders use this information to gauge the direction of the currency market. A reading above 50 is a sign of economic expansion. In contrast, a reading of less than 50 indicates a weakening economy.
Forex traders use this data to analyze the trend in the US economy. Traders typically compare historical data with the estimated economist figure. If the published figure is better than the previous month’s, the USD tends to rally. This is a common trade setup that relies on both fundamental and technical analysis.
ISM services purchasing managers index
The ISM is an institute of supply management founded in 1915 that monitors the supply and demand aspects of the economy. It has over 40,000 members in 90 countries. The index is derived from surveys that purchasing managers complete each month. This large membership enables ISM to provide a reliable indicator of global trends.
Purchasing managers’ surveys are often viewed as a leading indicator of economic growth. When they are optimistic, it may indicate better corporate earnings. When they are pessimistic, it could signal a deteriorating economy. The ISM services purchasing managers index for forex trading is an important factor to watch.
In addition to manufacturing, ISM also releases a non-manufacturing report. The index’s new-orders figure is used by traders to predict future economic activity. A rise in overall new orders indicates that the economy is expanding and a decline indicates economic contraction. When the value of the index is higher than expected, the stock market will tend to rally.
