There weren’t any high impact events yesterday for the EUR/USD pair, but today there was one. At 7:00 AM PST the Institute of Supply Management (ISM) Services/Non-Manufacturing Composite was released. Ideally we want this number to be increasing to reflect greater business activity and increased profits. The expected number for July was 56.9 but the actual came in much lower at 53.9. This was the lowest number since August of 2016, far lower than June’s 57.4.
Needless to say this surely would be classified as bad news for the US economy. As such I would expect it to have a negative impact on the strength of the dollar. As you can see below in the EUR/USD minute chart that is exactly what happened. At 7:00 AM on the dot the Euro spiked from an open of 1.18492 to a high of 1.18621. Over the next 50+ minutes the Euro steadily rose up and up and up to an intermediate resistance level of 1.18855. That’s a quick 36 pip gain.
The Euro also did a good job holding on to its gains as the morning progressed. As you can see it did fall, but it seemed to meet resistance around 1.18616. That’s still a 12 pip gain from the 7:00 AM open.
Something that can’t be directly accounted for or predicted is political turmoil, and unfortunately for the USD the Trump presidency has plenty of that so far. Today around 12:30 PST news broke that Robert Mueller, the special prosecutor investigating the Trump campaign’s potential Russian connections, has impaneled a grand jury in Washington DC. More legal problems for a administration already perceived by many to be in chaos is not a good recipe for a strong dollar. This is especially true with crucial votes for the budget and debt ceiling on the very near horizon.
Around 12:30 PST there was a huge spike, approx 22 pips, on the news. By 1:00 PM the Euro had given more than half of those gains back, but still the news did have some lasting negative effect on the dollar. This price action reflects the dark shadow the current political climate casts on dollar strength.
It is important that I remember to take the long view by examining the daily chart. These two events today did bid up the Euro, but in the larger view there wasn’t a huge movement in today’s price. There was only about a 30 pip gain between the open and the close. Tomorrow we have non-farm payrolls and the unemployment rate at 5:30 AM PST. I’m excited to see what effect those reports will have on the EUR/USD.