When is the US ISM Services PMI and how could it affect EURUSD?
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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 Thursday. The gauge is expected to have to 55.5 in October from 56.7 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 jump from 68.7 in September to 71.3 during the reported month.
Ahead of the key release, the US Dollar rallies to a nearly two-week high on Thursday amid a more hawkish stance adopted by the Federal Reserve. In fact, the US central bank indicated that it will continue to raise interest rates to combat stubbornly high inflation. This remains supportive of a sharp rise in the US Treasury bond yields, which, in turn, underpins the greenback and drags the EURUSD pair back below mid-0.9700s.
A stronger US macro data should be enough to provide an additional boost to the greenback. Conversely, any disappointment might do little to dent the underlying strong bullish sentiment surrounding the USD, suggesting that the path of least resistance for the EURUSD pair is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.
Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important levels to trade the major and writes: “EURUSD continues to trade below the descending trend line coming from October 27 and the Relative Strength Index (RSI) indicator stays within a touching distance of 30. In case the pair stages a technical correction, it is likely to face initial resistance at 0.9800 (psychological level) before 0.9820 (200-period SMA). Only a four-hour close above the latter could discourage sellers and open the door for an extended recovery toward 0.9860 (descending trend line, 100-period SMA).”
“On the downside, 0.9740 (psychological level) aligns as interim support before 0.9700 (psychological level, static level) and 0.9630 (Oct. 13 low),” Eren adds further.
• EUR/USD Forecast: Euro bulls lose hope as Powell reaffirms hawkish stance
• EURUSD tumbles to 2-week lows near 0.9750
• EUR/USD: Breach of 0.9750/0.9800 to easily expose 0.96 – TDS
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).
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