US ISM Non-Manufacturing 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 Thursday. The gauge is expected to edge higher to 63 in May from 62.7 previous. The employment sub-component is anticipated to have fallen to 58 during the reported month as compared to 58.8 in April.

Commenting on the US labor market, Joseph Trevisani, Senior Analyst at FXStreet writes: “Something unusual appears to be happening in US labor markets and it may be the key to how traders view the American economic recovery. New business is pouring into firms as consumers make up for time lost over the past year. Prices are soaring as demand collides with lingering product and material shortages from the lockdown regime. Yet, despite the booming economy, hiring is woeful.”

How Could it Affect EUR/USD?

Ahead of the key release, a combination of supporting factors provided a goodish lift to the US dollar and dragged the EUR/USD pair back closer to weekly lows touched in the previous session. A goodish pickup in the US Treasury bond yields underpinned the greenback. Apart from this, the upbeat ADP report further inspired the USD bulls and contributed to the intraday selling bias surrounding the major.

A stronger-than-expected US ISM Services PMI print, especially the employment sub-component, will further fuel speculations that the Fed would begin tapering its bond-buying program sooner rather than later. This should remain supportive of the intraday USD strength and continued exerting pressure on the major. Conversely, a weaker reading might hold the USD bulls from placing aggressive bets and help limit deeper losses for the pair. That said, a sharp pullback in the US equity futures could act as a tailwind for the safe-haven USD, suggesting that the path of least resistance for the pair is to the downside.

Meanwhile, Valeria Bednarik, Chief Analyst at FXStreet offered a brief technical outlook: “The EUR/USD pair fell to a fresh weekly low of 1.2158, holding nearby ahead of Wall Street’s opening. The 4-hour chart shows that after meeting sellers around its 20 SMA, the pair accelerated below the 100 SMA, indicating resurgent selling interest. Technical indicators head firmly south within negative levels, reaffirming the bearish case. The pair has room to extend its slide sub-1.2100 should the current sentiment persists.”

Key Notes

  •  US ISM Services PMI May Preview: The employment puzzle

  •  EUR/USD Forecast: Bears take over on tapering speculation

  •  EUR/USD Price Analysis: Still room for a deeper retracement

About the US ISM Services PMI

The ISM Non-Manufacturing Index released by the Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector. It is worth noting that services constitute the largest sector of the US economy and result above 50 should be seen as supportive for the USD.

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