**U.S. Dollar Gains Ground as ISM Services PMI Beats Estimates: In-Depth Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY**
*Original Analysis by Vladimir Zernov, FX Empire*
The U.S. dollar surged against major currency counterparts following the release of robust ISM Services PMI data, providing fresh momentum to the greenback and prompting significant moves in the forex market. As the ISM Services report topped market estimates, investors recalibrated their outlooks, fueling a rally in USD against the euro, British pound, Canadian dollar, and Japanese yen. This comprehensive analysis explores the driving forces behind the dollar’s strength and examines the technical and fundamental outlooks for EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
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### U.S. ISM Services PMI Surpasses Expectations
The Institute for Supply Management (ISM) reported that the Services Purchasing Managers Index (PMI) climbed to 53.8 in May, exceeding the consensus estimate of 51.0. This robust reading signals renewed vigor in the U.S. services sector, a key component driving employment and GDP.
Key takeaways from the ISM Services PMI report:
– **Headline number:** 53.8 (Consensus: 51.0, Previous: 51.9)
– **Business Activity Index:** 61.2
– **New Orders Index:** 54.1
– **Employment Index:** 47.1 (below the 50 mark, but not enough to dampen the upbeat tone)
– **Prices Paid Index:** 58.1
The readings above the 50-mark indicate expansion and reinforce the narrative that the U.S. economic engine remains resilient. For currency markets, the report served as a green light for dollar bulls, as expectations for Fed rate cuts were tempered by continued economic strength.
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### Greenback Rally: Driving Forces
The dollar’s fresh advance can be attributed to several factors stemming from the strong ISM data and broader economic context:
– **Resilient U.S. Economy:** The services sector remains the backbone of the American economy, and sustained expansion supports the case for a patient Federal Reserve.
– **Fed Rate Policy Reassessment:** With inflationary pressures lingering and services activity robust, traders are scaling back bets on imminent Fed rate cuts.
– **Global Divergence:** Compared with Europe and other developed markets, U.S. economic indicators continue to outshine, underpinning dollar demand as a safe haven.
– **Yield Differential:** Higher U.S. yields, especially on the short end, reinforce the greenback’s appeal.
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### EUR/USD Analysis
Following the ISM data, EUR/USD fell sharply, underscoring the contrasting fortunes between the American and European economies. The move lower was amplified by wider U.S.-Eurozone interest rate differentials and ongoing market unease surrounding the Euro bloc’s growth prospects.
**Key Drivers:**
– **Eurozone Economic Concerns:** Growth in the bloc remains sluggish, with recent data on manufacturing and services reflecting stagnation.
– **ECB Monetary Policy:** The European Central Bank is expected to stick to its dovish stance, keeping rates low for an extended period. Any talk of further easing would pressure the euro further.
– **U.S. Economic Outperformance:** Outright strength in American economic prints, as evidenced by the ISM Services PMI, exerts downside pressure on EUR/USD.
**Technical Outlook:**
– *Immediate Support*: 1.0800 zone (psychological and recent pivot)
– *Next Major Support*: 1.0750 region
– *Resistance*: 1.0860/1.0900
EUR/USD has broken below the 50-day moving average, exposing further downside risk. If bearish momentum continues, a test of 1.0750 becomes likely. Conversely, any sustained rebound above 1.0900 would lessen the grip of sellers.
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### GBP/USD Analysis
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