Title: U.S. Dollar Strengthens After ISM Services PMI Beats Expectations: Market Outlook for EUR/USD, GBP/USD, USD/CAD, and USD/JPY
Source: Adapted from analysis by Vladimir Zernov, FXEmpire
Original Article Link: [FXEmpire](https://www.fxempire.com/forecasts/article/u-s-dollar-gains-ground-as-ism-services-pmi-beats-estimates-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1546190)
The U.S. dollar gained momentum in foreign exchange markets following the release of stronger-than-expected ISM Services PMI data. With investors closely watching economic indicators for clues regarding future Federal Reserve policy, the surprise in the services sector breathed new life into the greenback. Currency pairs such as EUR/USD, GBP/USD, USD/CAD, and USD/JPY responded with clear reactions as traders recalibrated expectations for interest rate cuts.
Here is a comprehensive breakdown of the market reaction and technical analysis for the major currency pairs, adapted from Vladimir Zernov’s analysis for FXEmpire.
Overview: ISM Services PMI Boosts Dollar Sentiment
The Institute for Supply Management (ISM) reported that its Services Purchasing Managers Index (PMI) climbed to 53.8 in May 2024, beating consensus expectations of 50.8. This uptick in services activity signaled underlying strength in the U.S. economy, despite concerns surrounding the broader economic outlook.
Key implications of the ISM Services PMI report:
– A reading above 50 reflects growth in the services sector, which constitutes a significant portion of U.S. GDP.
– The upward surprise diminished immediate expectations of monetary easing by the Federal Reserve.
– Treasury yields moved higher due to the strong data, and this rise in yields provided support to the U.S. dollar.
– Market participants interpreted the report as a potential roadblock to near-term interest rate cuts.
As a result of the positive PMI report, the U.S. Dollar Index (DXY) rose above the 104.50 level, reflecting growing demand for the greenback across global markets.
EUR/USD: Euro Pulls Back Amid Dollar Strength
Following the PMI report, the euro lost ground against the U.S. dollar, with EUR/USD trending lower as traders priced in a potentially more hawkish Fed stance.
Key insights:
– EUR/USD faced significant resistance near the 1.0900 level during earlier trading sessions but failed to maintain momentum above this level.
– The euro’s decline was further exacerbated by dovish signals from the European Central Bank (ECB), which looks more inclined toward gradual policy easing.
– Technical analysis shows that EUR/USD tested the support near the 50-day moving average at 1.0825.
Support and resistance dynamics for EUR/USD:
– Immediate support is located at 1.0825. A move below this level could trigger a further pullback toward the next support zone at 1.0785.
– Below 1.0785, the 1.0750 level may offer additional stabilization.
– On the upside, resistance is seen at the 50-day moving average, followed by a stronger ceiling near 1.0900.
Outlook:
The euro may remain under pressure if the divergence between the ECB and the Fed strengthens. Investors will keep a close eye on upcoming eurozone economic data and further communications from central bank officials.
GBP/USD: British Pound Retreats from Recent Highs
The British pound also saw weakness following the ISM data, as the U.S. dollar’s renewed strength overpowered Sterling’s earlier gains. Although the UK economy has shown signs of recovery, especially with improving service sector activity, the stronger dollar cast a shadow over GBP/USD.
Key observations:
– GBP/USD moved below the psychologically important 1.2700 level, retreating from recent highs.
– The pair encountered resistance near the 1.2800 mark during prior attempts to
Explore this further here: USD/JPY trading.