Summary:

• ISM non-manufacturing PMI rises to 59.8 for September
• Reading was a 12 year high and well above prior and expected
• USDJPY rises back near to 11-week high after the release

 Following the earlier expected drop in ADP employment change, the most recent data on the US services sector has shown a stellar reading with the ISM non-manufacturing PMI rising to its highest level in 12 years. In fact there have only been 3 previous prints in excess of today’s number. The print of 59.8 was well above the consensus forecast of 55.5 and also the prior release of 55.3 and supports Monday’s manufacturing equivalent in painting a picture of strength in the US economy.  

 The rise in today’s ISM non-manufacturing PMI supports the recent rise in the manufacturing equivalent. Source: XTB Macrobond

The report also contains an employment component and this a further source of good news, in rising to its highest level since the early 2000s. There’s been a fairly good correlation historically speaking between the employment part of the ISM and NFP and the strong rise seen in the former in recent years is outstripping the latter.  

 A strong rise in the employment component could bode well for Friday’s NFP and remove some of the negativity surrounding the earlier ADP release. Source: XTB Macrobond

In terms of market reaction the USDJPY has gained since the release with the pair trading back close to its highest level since July.Price has failed to hold above the 113 handle in recent sessions but if it can gain traction here then a retest of prior swing resistance at 114.32 could be on the cards. For the time being the market is towards the upper bound of its recent range. 

 The USDJPY remains near the top of its recent range but has so far failed to hold above 113. source: xStation