US ISM Manuf. Preview: what to expect of USD/JPY

The Institute for Supply Management will publish its manufacturing PMI for the month of November later in the NA session.

Market consensus expects the indicator to have improved to 52.2 during last month, extending the uptrend seen since August and adding to the already healthy recovery of the US economy.

According to ‘Rates, FX and Commodities Strategy’ at TD Securities, “ISM surveys capturing business sentiment and activity since the US election outcome will be closely watched as such 'soft' data provide a more timely gauge of economic confidence and any sharp deterioration may give the Fed hesitancy to tighten policy in December. For now, we view the likelihood of a negative responses among businesses to US elections as low given the favorable state of financial market conditions”.

Regarding FX, a positive result today should add to the ongoing constructive outlook around the buck. That, plus the current risk-on sentiment following the OPEC deal, could boos USD/JPY further and open the door for a potential test of the 115.00 handle, levels last traded in February. On the opposite case, the initial support emerges at last Friday's top at 113.91 prior to Monday's low at 111.32.