US ISM Services PMI Overview

The Institute of Supply Management (ISM) will release the Non-Manufacturing Purchasing Managers' Index (PMI) - also known as the ISM Services PMI – at 14:00 GMT this Tuesday. The gauge is expected to ease to 60.0 in September from 61.7 previous. The Fed, however, looks more at the labour market and inflation than growth. Hence, investors will keep a close eye on the Employment sub-component, which is anticipated to hold steady at 53.7 during the reported month. Conversely, the Prices Paid sub-component, which represents inflation, is expected to rise sharply to 79.3 from 75.4 in August.

How Could it Affect EUR/USD?

Signs of rising inflationary pressure in the services sector, along with an expansion in employment would reaffirm expectations for an early policy tightening by the Fed. This would be seen as a positive trigger for the US dollar and prompt fresh selling around the EUR/USD pair. Conversely, the market reaction to any disappointment is more likely to be muted as investors would wait for a confirmation from Friday's official monthly jobs report. This, in turn, suggests that the path of least resistance for the pair is to the downside.

Meanwhile, Yohay Elam, FXStreet's own Analyst offered a brief technical outlook for the EUR/USD pair: “Euro/dollar has ended its flirt with upside momentum and continues trading below the 50, 100 and 200 Simple Moving Averages. Bears remain in control.”

Yohay also provided important technical levels to trade the major: “Some support awaits at the daily low of 1.1590, followed by the 2021 trough of 1.1562. Further down, 1.15 awaits. The temporary high of 1.1610 is the first resistance line to watch. Monday's high of 1.1640 is next up, and it is followed by 1.1665.”

Key Notes

  •  US September ISM Services PMI Preview: Eyes on inflation and employment details

  •  EUR/USD Forecast: Turnaround Tuesday? Only to the downside as long list of issues only grows

  •  EUR/USD Forecast: Bears preparing to defy the year’s low

About the US ISM Services PMI

The ISM Non-Manufacturing Index released by the Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector. It is worth noting that services constitute the largest sector of the US economy and results above 50 should be seen as supportive for the USD.

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