EUR/USD breaks above 1.0600 on USD sell-off after weak ISM
- US Dollar under pressure across the board amid risk appetite and falling yields.
- US: A weak ISM Service sector report follows larger than expected increase in NFP.
- EUR/USD having best day in a month, still down for the week.
The EUR/USD jumped above 1.0600 amid a sharp reversal of the US Dollar that tumbled across the board following the ISM Service PMI report. The pair rose 1.25% from the daily low and is having the best day in a month.
NFP and ISM
The first leg lower of the US Dollar followed the release of the Nonfarm Payroll report. The economy added 223K in December which represents a slowdown from the prior month and shows the job market remains in good shape. The unemployment rate dropped to 3.5%.
More recently, ISM Service PMI index came in at 49.6 in December, well below the 55 of market consensus. The Price Paid Index fell unexpectedly from 70 to 67.6. The report triggered concerns about a potential “hard landing” for the US economy. At the same time, the jobs numbers keep the debate open about the next Federal Reserve rate hike by 25 or 50 basis points.
After the figures, the Greenback accelerated the decline across the board as US yields tumbled. The US 10-year yield fell from 3.75% to 3.61%, the lowest level since December 20. European yields are also sharply lower. The German 10-year bond yield fell to 2.19%, the lowest since December 19, while the Italian 1-year fell to 4.19%.
The EUR/USD peaked at 1.0613, more than a hundred pips above the one month low it hit earlier at 1.0483. Euro bulls are now looking at the 1.0635 area that is the next resistance. Ahead of the weekend the bias is bullish while above 1.0550.
Technical levels
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
