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 Wednesday. The gauge is expected to drop to 53.5 in July from 55.3 in the previous month. Given that the Fed looks more at inflation than growth, investors will keep a close eye on the Prices Paid sub-component, which is expected to rise to 81.6 from 80.1 in June.
According to Eren Sengezer, European Session Lead Analyst at FXStreet: “Markets should pay close attention to the Employment component as well. Ahead of Friday’s jobs report, a print below 50 would point to a contraction in the service sector employment and put additional weight on the USD’s shoulders.”
How Could it Affect EUR/USD?
Ahead of the key release, the risk-on impulse in the equity markets was seen undermining the safe-haven US dollar. A weaker-than-expected US macro data could exert additional downward pressure on the buck. That said, a further rise in the US Treasury bond yields, bolstered by the overnight hawkish comments by several Fed officials, should limit deeper USD losses.
Conversely, a stronger print would be enough to provide a modest lift to the greenback and prompt fresh selling around the EUR/USD pair. The immediate market reaction, however, is more likely to be short-lived as investors might prefer to wait on the sidelines ahead of the US monthly jobs report (NFP) on Friday. Nevertheless, a significant divergence from the expected reading would still influence the USD and produce some meaningful trading opportunities around the EUR/USD pair.
Eren Sengezer, meanwhile, outlined important technical levels to trade the major: “EUR/USD faces immediate resistance at 1.0200 (psychological level, 50-period SMA on the four-hour chart). As long as this level stays intact, buyers could opt to remain on the sidelines. In case the pair reclaims that level and starts using it as support, additional gains toward 1.0230 (Fibonacci 38.2% retracement level of the latest downtrend), 1.0275 (200-period SMA) and 1.0300 (Fibonacci 50% retracement) could be witnessed.”
“On the downside, 1.0150 (Fibonacci 23.6% retracement) aligns as first support ahead of 1.0100 (psychological level, static level). A four-hour close below the latter could be seen as a significant bearish development and trigger another leg lower toward parity,” Eren added further.
Key Notes
• US July ISM Services PMI Preview: Inflation component holds the key
• EUR/USD Forecast: Euro to have a tough time regathering recovery momentum
• EUR/USD Price Analysis: Next on the upside comes 1.0300
About the US ISM manufacturing PMI
The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD consolidates near two-week high, setup favours bullish traders
The EUR/USD pair is seen consolidating the previous day's strong gains to over a two-week high and oscillating in a narrow trading band through the Asian session on Friday. Spot prices currently trade around the 1.0775-1.0780 region and seem poised to build on the recent bounce from the 1.0635 region.
GBP/USD grinds below 1.2600 within fortnight-old bullish channel
GBP/USD buyers take a breather at the highest level in one month, making rounds to 1.2550 during early Friday morning in Europe. In doing so, the Cable bulls pause after posting the biggest daily gain since early March the previous day.
Gold bulls need acceptance from $1,970, $1,990 and Fed
Gold remains sidelined as bulls take a breather after rising the most in five weeks the previous day, staying on the way to posting the second consecutive weekly gain. The XAU/USD is yet to cross the short-term key hurdles.
Binance.US to suspend USD deposits, citing aggressive and intimidating tactics by the SEC
BinanceUS, the American arm of Binance.com, has indicated plans to suspend USD deposits, noting that its banking partners would do the same for withdrawal beginning June 13. According to the notice, the move is attributed to aggressive and intimidating tactics employed by the United States Securities and Exchange Commission (SEC).
Jobless claims may offer well-timed comfort for the Federal Reserve
Jobless claims spiked last week in what could be the start of another trend higher after stabilizing over the last few months. Claims had been expected to rise much earlier than this but for one reason or another, they've stayed remarkably steady. It's also worth noting that this is only one release so unless it's backed up by more of the same, we can't read much into it.