ISM Services PMI falls below expectations

The headline ISM Services Purchasing Manager’s Index (PMI) fell to 57.1 in April from 58.3 in March, below expectations for a slight rise to 58.5, according to the latest release by the Institute for Supply Management (ISM).

Subindices:
The Business Activity Index rises to 59.1 from 55.5 in March.
The Prices Paid Index rises to 84.6 from 83.8, a fresh record high.
The New Orders Index falls to 54.6 from 60.1, its lowest since February 2021.
The Employment Index falls to 49.5 from 54.0.


It is noteworthy that the disappointing release of the US ADP report exerted some downward pressure on the US dollar and lifted the EUR/USD pair back above the mid-1.0500s. The prospects 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 concerns that the European economy will suffer the most from the Ukraine crisis, which, in turn, should continue to weigh on the euro. 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 outcome of a two-day FOMC meeting, scheduled to be announced later during the US session.

The EUR/USD pair keeps trading near a multi-year low of 1.0470 achieved last week, consolidating yearly losses. The daily chart shows that bears are still in the drivers’ seat, given that technical indicators remain lifeless near oversold readings, reflecting absent buying interest. At the same time, the pair is far below all of its moving averages, with a bearish 20 SMA providing dynamic resistance around 1.0730.

In the near term, and according to the 4-hour chart, the pair is neutral. It keeps seesawing around a flat 20 SMA while the longer moving averages maintain their downward slopes far above the current level. Technical indicators aim to cross their midlines into positive territory but without enough momentum to confirm a firmer recovery. Bulls will have better chances if the pair extends its rally above 1.0595, April 29 daily high and the immediate resistance level.

Markets haven’t reacted much to the latest PMI survey, with the US dollar ranging ahead of the Fed policy announcement later on Wednesday. The DXY is currently trading close to the 103.50 mark, having rebounded from earlier session lows near 103.20 since the start of US trade.