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US service data pulls back but USD remains firm


  • US January ISM non-manufacturing 56.7 vs 57.1 exp

  • Joint lowest since July, but USD remains higher on the day

  • EURUSD near 1.14, USDJPY lower despite risk-on flows elsewhere


The latest data from the US services sector has come in below forecast, but on the whole the reading still suggests that the industry is holding up pretty well. The ISM non-manufacturing PMI dropped to 56.7, against an expected 57.1 and while this is the joint lowest since July 2018, it still remains firmly above the 50 mark. For comparison the UK equivalent dropped to 50.1 this morning while the Euro area wide figure came in at 51.2, so compared to these the US is still outperforming.

Both the PMI services and ISM non-manufacturing readings have pulled back of late but they continue to hold up pretty well compared to their peers.


This relative outperformance from the US may go some way to explain the persistent strength in the US dollar, with the greenback remaining well supported despite the perceived dovish shift in the Fed last week. Looking at the heatmap on xStation it is apparent that the USD is still higher on the day since the data, with the largest declines coming against GBP - the UK services sector almost fell into contractionary territory earlier with the PMI falling to 50.1.

The USD is gaining on balance today despite the slightly soft ISM data, with the largest gains seen against the pound. Source: xStation


Of all the USD pairs, the USDJPY is one that stands out at present as the market has returned to the big 110 handle in recent trade. The cross hit its highest level of the year yesterday, but a wick above the D1 candle does indicate some possible resistance around 110.15-110.20. This region was the lows before the market broke down at the start of the year and could now have flipped in polarity to be resistance. The 8/21 EMAs have converged once more and have just printed a bullish cross but the aforementioned resistance from 110.15-110.20 could remain a significant hurdle to overcome.


The USDJPY is currently probing potentially key resistance around the 110.15-110.20 region. A break above there would pave the way for a sizable push higher but a failure to do so would open up the chance of significant downside back towards 105. Source: xStation


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