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

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 Wednesday. The gauge is expected to edge lower to 54.5 in June from 55.9 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 expected to rise to 83.9 from 82.1 in May.

How Could it Affect EUR/USD?

Ahead of the key release, the US dollar built on the previous day's blowout rally and surged to a fresh two-decade high on Wednesday amid hawkish Fed expectations. Apart from this, the worsening global economic outlook underpinned the safe-haven buck and dragged the EUR/USD pair below the 1.0200 mark for the first time since December 2002.

Stronger-than-expected US macro data would reaffirm bets for more aggressive Fed rate hikes and push the US bond yields higher, along with the USD. Conversely, a softer reading is more likely to be overshadowed by concerns that a big jump in natural gas prices could drag the Eurozone economy faster and deeper into recession. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside.

Valeria Bednarik, Chief Analyst at FXStreet, offered a brief technical outlook and explained: “The EUR/USD pair is sharply down for a second consecutive day, and there are no technical signs of bearish exhaustion. In the daily chart, technical indicators are heading south pretty much vertically, entering oversold territory and reflecting persistent selling interest. The 20 SMA, in the meantime, accelerated south, currently at around 1.0470.”

“The near-term picture is bearish, as, in the 4-hour chart, technical indicators keep heading lower despite being at extreme oversold levels. At the same time, the pair is developing well below its moving averages, with the 20 SMA accelerating its decline and developing over 200 pips above the current level,” Valeria added further.

Key Notes

  •  EUR/USD Forecast: No rest for bears as panic persists

  •  EUR/USD Price Analysis: Parity at the end of the tunnel?

  •  EUR/USD Forecast: Sellers to retain control with a drop below 1.0200

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).