When is the US ISM Services PMI and how could it affect EUR/USD?

Haresh Menghani FXStreet

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 Monday. The gauge is expected to come in at 51.5 for May, down a little from 51.9 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 anticipated to fall from 59.6 in April to 57.8 during the reported month.

How Could It Affect EUR/USD?

Ahead of the key release, the prospects for another 25 bps rate hike by the Federal Reserve (Fed) in June push the US Dollar (USD) higher for the second successive day and drag the EUR/USD pair back blow the 1.0700 mark. A stronger US ISM Services PMI, along with higher-than-expected Prices Paid Index, will reaffirm market expectations, which should provide an additional boost to the Greenback and pave the way for a further depreciating move for the major.

In contrast, any immediate market reaction to the disappointing headline print is more likely to remain limited amid a further rise in the US Treasury bond yields. This, in turn, favours the USD bulls and suggests that the path of least resistance for the EUR/USD pair is to the downside. That said, a generally positive risk tone could act as a headwind for the safe-haven buck and help limit deeper losses for the major, at least for the time being.

Eren Sengezer, Editor at FXStreet, offers a brief technical outlook and writes: “EUR/USD broke below the 20 and the 50-period Simple Moving Averages (SMA) on the four-hour chart and the Relative Strength Index (RSI) indicator on the same chart dropped below 50, reflecting the bearish bias in the short term.

Eren also outlines important technical levels to trade the EUR/USD pair: “The upper-limit of the descending regression channel aligns as immediate support at 1.0680. In case EUR/USD returns within that channel by confirming that level as resistance, 1.0650 (mid-point of the channel, end-point of the latest downtrend) aligns as strong support before bears could target 1.0600 (psychological level, lower-limit of the descending channel).”

“On the upside, a four-hour close above 1.0720 (50-period SMA) could discourage sellers. In that scenario, 1.0750 (Fibonacci 23.6% retracement level of the latest downtrend) and 1.0780 (100-period SMA) align as next hurdles,” Eren adds further.

Key Notes

• EUR/USD Forecast: Euro could stretch lower in case 1.0680 support fails

• EUR/USD remains offered and below 1.0700 ahead of data, Lagarde

• EUR/USD: Dollar attention to the Fed?

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).

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD tests nine-day EMA support near 1.1850

EUR/USD inches lower during the Asian hours on Monday, trading around 1.1870 at the time of writing. The 14-day Relative Strength Index momentum indicator at 56 stays above the midline, confirming improving momentum. RSI has cooled from prior overbought readings but stabilizes above 50, suggesting dips could stay limited before buyers reassert control.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold slides below $5,000 amid USD uptick and positive risk tone; downside seems limited

Gold attracts fresh sellers at the start of a new week and reverses a part of Friday's strong move up of over $150 from sub-$4,900 levels. The commodity slides back below the $5,000 psychological mark during the Asian session, though the downside potential seems limited amid a combination of supporting factors.

Bitcoin, Ethereum and Ripple consolidate within key ranges as selling pressure eases

Bitcoin and Ethereum prices have been trading sideways within key ranges following the massive correction. Meanwhile, XRP recovers slightly, breaking above the key resistance zone. The top three cryptocurrencies hint at a potential short-term recovery, with momentum indicators showing fading bearish signs.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.