U.S. Dollar Moves Higher As Composite PMI Beats Estimates: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Gains Ground As Traders Focus On PMI Reports

U.S. Dollar Index gains ground as traders react to economic reports. Services PMI declined from 51.0 in April to 50.9 in May, compared to analyst forecast of 51.1. Manufacturing PMI increased from 54.5 to 55.3, while analysts expected that it would drop to 53.8. Numbers above 50 show expansion.

The better-than-expected Manufacturing PMI report provided support to Composite PMI, which remained unchanged at 51.7.

Traders also had a chance to take a look at the Initial Jobless Claims report. The report indicated that 209,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 210,000.

U.S. Dollar Index continues its attempts to settle above the 99.50 level. In case U.S. Dollar Index manages to settle above 99.50, it will move towards the nearest resistance, which is located in the 99.70 – 99.85 range.

EUR/USD Retreats As PMI Reports Miss Estimates

EUR/USD pulls back as traders reacted to PMI reports. Euro Area Composite PMI decreased from 48.8 in April to 47.5 in May, while analysts expected that it would remain unchanged at 48.8. Numbers below 50 show contraction. Rising oil prices put additional pressure on EUR/USD in today’s trading session.

Currently, EUR/USD attempts to settle below the support level at 1.1585 – 1.1600. In case this attempt is successful, EUR/USD will move towards the next resistance level, which is located in the 1.1500 – 1.1515 range. RSI is in the moderate territory, so there is enough room to gain downside momentum in the near term.

GBP/USD Pulls Back As Services PMI Drops Below 50

GBP/USD is under pressure as traders focus on the weaker-than-expected UK Services PMI report. The report indicated that UK Services PMI decreased from 52.7 in April to 47.9 in May, compared to analyst forecast of 51.8.

GBP/USD failed to settle above the resistance level at 1.3450 – 1.3465 and pulled back towards the 1.3400 level. In case GBP/USD settles below 1.3400, it will move towards the support level at 1.3335 – 1.3350.

USD/CAD Tests Resistance At 1.3775 – 1.3790

USD/CAD is moving higher as demand for commodity-related currencies declines. Traders are worried that high oil prices will hurt economic growth and reduce demand for commodities.

From the technical point of view, USD/CAD attempts to settle above the resistance level at 1.3775 – 1.3790. If USD/CAD settles above the 1.3790 level, it will move towards the next resistance at 1.3860 – 1.3875.

USD/JPY Tests New Highs As Treasury Yields Rise

USD/JPY is slowly moving higher as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed back above the 4.10% level, while the yield of 10-year Treasuries settled above 4.60%. Treasury yields keep moving higher as bond traders bet that Fed will be forced to raise rates to fight inflation.

It should be noted that Japan’s bond market is trying to stabilize after recent sell-off. The yield of 10-year Japan government bonds settled near 2.75%. The difference between yields in the U.S. and Japan continues to serve as a bullish catalyst for USD/JPY.

If USD/JPY climbs above the 159.50 level, it will move towards the psychologically important 160.00 level. A successful test of the 160.00 level will push USD/JPY towards the resistance at 161.50 – 162.00. Traders should note that BoJ may interevene again to defend the yen.

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