ISM Services PMI and US Dollar

Is the dollar back on the uptrend?

After overall positive NFP numbers, now eyes turn to today's ISM Service PMI numbers. Service purchasing managers' index for June is projected to decline slightly from 64 points in May; however, it is still expected to be above 63. Generally, any numbers above 60 represent fast recovery and economic growth, even above pre-pandemic levels.

The market reaction to this data is interesting. Any estimated number today will be positive for the US dollar, even the missing data. 

As I mentioned earlier, the missing number most probably will be above 60, and even that means that economic recovery is moving forward, much faster than expectations and pre-pandemic level. This recovery speed has two messages. First of all, overhitting the economy can put pressure on FED to reduce the asset purchasing amount, which is the first step to increase the rates. It is positive by itself for US dollar value at the current moment. On the other hand, while job numbers also generally were favorable, data supporting the economic power of the United States, which is again positive for US dollar value. 

On the other hand, we will have the ISM Services Prices Paid data for June as well. While Purchasing managers in the industrial and Manufacturing sectors reported all-high inflationary pressures, now investors will follow this number to follow up the inflation expectations, as represented by the Prices Paid component. 

DXY technical overview:

Technically it is above the OBV trend line and PP at 92.28. Price is rising and RSI at 63, signaling for higher levels. R3 at 92.50 is the next target, which breathing above that will put the July 2 high at 92.76 in the spotlight. With the current price level, now in all main charts from 30 min above, Price moves above the 20 and 50 MA lines. On the flip side, breaching under 91.50 can change the direction.