EUR/USD Breaks Above 1.0600 On US Dollar Sell-Off After Weak ISM
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- The US dollar has been under pressure across the board amid risk appetite and falling yields.
- In the US, a weak ISM service sector report follows a larger-than-expected increase in NFP numbers.
- The EUR/USD currency pair has been having the best day in a month, though it is still down for the week.
The EUR/USD currency pair jumped above 1.0600 amid a sharp reversal of the US dollar, which tumbled across the board following the ISM Service PMI report. The pair rose 1.25% from the daily low, and it's been having the best day in a month.
NFP and ISM
The first leg lower of the US dollar followed the release of the Nonfarm Payroll report. The economy added 223 thousand in December, which represents a slowdown from the prior month and shows the job market remains in good shape. The unemployment rate dropped to 3.5%.
More recently, the ISM Service PMI Index came in at 49.6 in December, well below the reading of 55 that the market expected. The Price Paid Index fell unexpectedly from 70 to 67.6. The report triggered concerns about a potential “hard landing” for the US economy. At the same time, the jobs numbers have been keeping the debate open about the next Federal Reserve rate hike by 25 or 50 basis points.
After the figures, the greenback accelerated the decline across the board as US yields tumbled. The US 10-year yield fell from 3.75% to 3.61%, the lowest level seen since Dec. 20. European yields are also sharply lower. The German 10-year bond yield fell to 2.19%, the lowest since Dec. 19, while the Italian 1-year fell to 4.19%.
The EUR/USD pair peaked at 1.0613, more than a hundred pips above the one-month low it hit earlier at 1.0483. Euro bulls are now looking at the 1.0635 area that is the next level of resistance. Ahead of the weekend, the bias appears to be bullish while above 1.0550.
Technical Levels
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