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U.S. Dollar (DXY) Retreats After Weak Services PMI Report

By:
Vladimir Zernov
Published: Aug 23, 2022, 18:51 UTC

EUR/USD tried to settle back above 1.0000 but faced strong resistance. 

U.S. Dollar (DXY) Retreats After Weak Services PMI Report

In this article:

Key Insights

  • The disappointing U.S. Services PMI report was the main catalyst for currency markets today. 
  • EUR/USD and GBP/USD rebounded from recent lows. 
  • Commodity-related currencies enjoyed strong support as commodity markets moved higher. 

U.S. Dollar Pulls Back From Highs

As it turned out, the main event of the day was the release of the U.S. Services PMI report. The report indicated that Services PMI declined from 47.3 in July to 44.1 in August, compared to analyst consensus of 49.2. The numbers shocked markets, and the U.S. dollar found itself under strong pressure.

The New Home Sales report was also disappointing as it indicated that New Home Sales decreased by 12.6% month-over-month in July. The housing market feels the impact of higher rates.

The weak economic data triggered a sell-off in the U.S. dollar. However, the American currency managed to move away from daily lows as Treasury yields recovered and moved higher.

EUR/USD Stays Below The 1.0000 Level

EUR/USD made an attempt to settle back above the 1.0000 level after the release of the U.S. Services PMI report. However, it faced strong resistance and pulled back towards 0.9970.

The economic situation in Europe remains tense due to the energy crisis. Today, Polish chemicals producer Grupa Azoty said that it would stop producing nitrogen fertilizers, caprolactams and nylon 6 due to high natural gas prices. A similar blow is experienced by many European producers.

In this environment, EUR/USD may not have enough catalysts to quickly move back above the psychologically important 1.0000 level.

EUR/USD

Currently, EUR/USD is stuck in the wide 0.9950 – 1.0000 range. In case EUR/USD manages to settle above 1.0000, it will move towards the resistance at 1.0030. A successful test of this level will open the way to the test of the next resistance at 1.0050.

On the support side, a move below 0.9950 will push EUR/USD towards the support at 0.9930. In case EUR/USD declines below this level, it will head towards the next support at 0.9900.

British Pound Enjoyed A Rebound

GBP/USD made an attempt to settle above 1.1850 as traders rushed to buy the pound after the recent sell-off. UK Services PMI report was weak but the market ignored the numbers and focused on profit-taking after the recent strong move.

GBP/USD dynamics have been similar to EUR/USD dynamics in recent trading sessions. It remains to be seen whether GBP/USD bulls will find sufficient catalysts to push the pound higher in case EUR/USD continues to trade below the 1.0000 level.

A Strong Day For Commodity-Related Currencies

Canadian dollar, Australian dollar, and New Zealand dollar enjoyed strong support today amid a rebound in commodity markets. The weak dollar contributed to this rebound.

WTI oil, copper, gold, silver, and other commodities have moved higher today. In case this rebound continues, commodity-related currencies will get more support in the upcoming trading sessions.

Japanese Yen Gains Some Ground Against U.S. Dollar

The general weakness of the American currency provided support to Japanese yen and pushed USD/JPY towards the 136.00 level.

However, a single disappointing report from the U.S. cannot break the strong upside trend in USD/JPY. The Japanese yen will certainly need additional catalysts to gain more ground against the U.S. dollar.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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