EUR/USD Nosedives on Record US Services PMI, Clarida Remarks

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EUR/USD PRICE OUTLOOK: US DOLLAR CATCHES BID ON SERVICES PMI REPORT, FED’S CLARIDA

  • Major currency pairs whipsawing in an eventful morning for the broader US Dollar
  • US Dollar pivoting higher now as bulls unwind the reaction to weak ADP jobs data
  • EUR/USD plummets on record ISM Services PMI and comments from Fed’s Clarida

US Dollar price action has been on a roller coaster ride so far during Wednesday’s trading session. The broader DXY Index was off by -0.25% at intraday lows this morning, but the US Dollar has since reversed its bout of weakness and then some. Initial US Dollar selling pressure seemed to correspond with disappointing ADP jobs data, which came in at 330K versus the market forecast looking for 690K. This is being unwound by the latest ISM Services PMI report and relatively hawkish comments from the Fed’s Clarida.

As detailed on the DailyFX Economic Calendar, ISM Services PMI data smashed expectations and jumped to its highest reading on record. Not to mention, all 17 industries reported growth in activity while both employment and prices paid subcomponents increased at faster rates month-over-month. Vice Chair of the Federal Reserve, Richard Clarida, stated how he expects conditions for raising interest rates to be met by the end of 2022 and added that the economy has made enough progress to warrant the tapering of Fed asset purchases in December this year.

EUR/USD PRICE CHART: 15-MINUTE TIME FRAME (04 AUGUST 2021 INTRADAY)

Chart by @RichDvorakFX created using TradingView

This one-two punch invigorated Fed hawks and US Dollar bulls. EUR/USD price action now trades in the red thanks to a 60-pip plunge from intraday highs and rejection of the 1.1900-handle. USD/JPY surged higher in similar fashion owing to the influx of US Dollar strength. While these developments are surely making waves across markets, volatility looks likely to linger throughout the rest of the week.

This is in consideration of high-impact event risk posed by the upcoming release of nonfarm payrolls data due Friday, 06 August at 12:30 GMT. A strong NFP report stands to reinforce the case for Fed tapering before year-end, which could see the US Dollar strengthen further. Conversely, a miss on NFPs would likely see the US Dollar whipsaw lower once more.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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