EUR/USD, GBP/USD, AUD/USD, USD/JPY – U.S. Dollar Retreats As ISM Report Disappoints

Key Insights

• U.S. Dollar is losing ground against a broad basket of currencies after weak ISM Non-Manufacturing PMI report. 
• Commodity-related currencies rally amid a strong rebound in commodity markets. 
• USD/JPY pulled back towards the 132.50 level. 

U.S. Dollar Is Under Strong Pressure Ahead Of The Weekend

U.S. dollar found itself under significant pressure after the release of the disappointing ISM Non-Manufacturing PMI report. Factory Orders data, which indicated that Factory Orders declined by 1.8% month-over-month in November, served as an additional bearish catalyst for the American currency.

Traders bet that the Fed will be forced to abandon its hawkish plans as high interest rates put too much pressure on the economy. Treasury yields gained strong downside momentum, which indicates that market sentiment is shifting.

EUR/USD Rebounded Above 1.0600

EUR/USD moved back above the 1.0600 level as traders reacted to the economic data from the U.S.

In the EU, traders focused on the inflation data from the Eurozone. Euro Area Inflation Rate declined from 10.1% in November to 9.2% in December, compared to analyst consensus of 9.7%. However, Core Inflation Rate increased from 5% to 5.2%, so the ECB will surely stay hawkish, which is bullish for the European currency.

GBP/USD Tests The 20 EMA At 1.2050

GBP/USD rebounded towards the 20 EMA at 1.2050 as traders focused on the general weakness of the U.S. dollar.

In the UK, Halifax House Price Index indicated that house prices declined by 1.5% month-over-month in December. Higher interest rates and economic uncertainty continue to put pressure on the UK housing market. In the near term, this weakness should have no major impact on GBP/USD as traders are mostly focused on Fed’s moves.

Commodity-Related Currencies Gained Strong Upside Momentum

AUD/USD rebounded towards the 0.6850 level amid a broad rally in commodity markets. A successful test of the 0.6850 level will open the way to the test of the resistance at 0.6900.

Other commodity-related currencies have also managed to gain strong upside momentum in today’s trading session. NZD/USD settled above the 0.6300 level and is currently trying to climb above 0.6335. USD/CAD tested new lows at 1.3460.

USD/JPY Pulls Back From Weekly Highs

USD/JPY pulled back towards 132.50 after an unsuccessful attempt to settle above 134.75. USD/JPY remains extremely sensitive to the changes in Fed policy outlook. If USD/JPY settles below the 132.50 level, it will move towards the next material support level at 131.70.

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