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What Shutdown? USD/JPY Jumps after October ISM Services Beat

What Shutdown? USD/JPY Jumps after October ISM Services Beat

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- ISM Services climbs back above trailing 12-month average (54.0) at 55.4.

- Employment subindex rise suggests NFP growth to rise back towards +180K.

- US yields continue to climb, supporting the buck across the majors.

After the October ISM Manufacturing last week suggested that the US economy isn’t in too poor of a position coming out of the government shutdown, the ISM Services index confirmed the improving conditions. These prints seem contradictory given the downtick in consumer confidence; perhaps this is an indication that the economy remains strong, and that consumption trends should rebound shortly.

With US economic data improving, US Treasury yields increased following the data, indicative that traders believe a tally has been added to the “December taper” column. The US Treasury 10-year note yield increased from 2.645% ahead of the release to as high as 2.666%; the yield was well-supported off the daily low at 2.593%.

Here’s the data lifting the US Dollar:

- ISM Services (OCT): 55.4 versus 54.0 expected, from 54.4.

- ISM Employment (OCT): 56.2 from 52.7.

USDJPY 1-minute Chart: November 5, 2013 Intraday

What_Shutdown_USDJPY_Jumps_after_October_ISM_Services_Beat_body_x0000_i1027.png, What Shutdown? USD/JPY Jumps after October ISM Services Beat

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the data, the US Dollar rallied immediately from ¥98.33 to as high as 98.58, and after a brief setback, had recaptured its post-release high at the time of writing. Similar price action was observed in other USD-based pairs, with the AUDUSD, EURUSD, and GBPUSD all slipping after the data.

--- Written by Christopher Vecchio, Currency Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.