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 Tuesday. The gauge is expected to rise to 58 in March from 56.5 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 edge higher to 83.3 from 83.1 in February.

How Could it Affect EUR/USD?

Ahead of the key release, the US dollar was seen consolidating its gains recorded over the past three trading sessions. That said, elevated US Treasury bond yields, bolstered by speculations for a more aggressive policy tightening by the Fed, acted as a tailwind for the buck. Stronger-than-expected US macro data would reaffirm hawkish Fed expectations and push the US bond yields/USD higher. Conversely, a softer reading is more likely to be overshadowed by the prospect of more Western sanctions on Russia, which should continue to act as a headwind for the shared currency. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside. That said, any immediate market reaction is more likely to be short-lived as the focus remains glued to the FOMC meeting minutes, due for release on Wednesday.

Meanwhile, Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the pair: “EUR/USD registered a daily close below the key 1.1000 level, where the Fibonacci 38.2% retracement of the latest downtrend is located. During Monday's action, the 20-period SMA on the four-hour chart crossed below the 200-period and the 50-period SMAs. Additionally, the Relative Strength Index (RSI) indicator stays below 40, confirming the bearish tilt.”

Eren also outlined important technical levels to trade the major: “The pair needs to rise above 1.1000 and use that level as support in order to attract bulls and stage a recovery. 1.1020 (100-period SMA) and 1.1040 (Fibonacci 50% retracement, 50-period SMA) align as the next technical hurdles.”

“On the downside, supports are located at 1.0960 (static level), 1.0940 (Fibonacci 23.6% retracement) and 1.0900 (psychological level),” Eren added further.

Key Notes

  •  EUR/USD Forecast: Monday's close below 1.1000 an ominous sign for euro

  •  EUR/USD consolidates sub-1.1000 ahead of more US data/Fed speak as geopolitics continue to weigh

  •  EUR/USD to plummet towards 1.08 on a break below key support at 1.0950 – OCBC

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 results above 50 should be seen as supportive for the USD.