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U.S. Dollar Gains despite Better-than-Expected ISM Services Index

U.S. Dollar Gains despite Better-than-Expected ISM Services Index

2011-09-06 14:47:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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THE TAKEAWAY: U.S. ISM Non-Manufacturing Surprises > Services Grow Faster-than-Expected > USDollar Index Rises

After last week’s report that showed manufacturing in the United States fell in August, the Institute for Supply Management’s services index outpaced expectations and in fact expanded in August. The 53.3 reading was easily above the 51.0 forecast, according to a Bloomberg News survey, and was slightly higher than the 52.7 print from July.

USD/CAD 1-minute Chart: September 6, 2011

U.S._Dollar_Gains_despite_Better-than-Expected_ISM_Services_Index_body_Picture_1.png, U.S. Dollar Gains despite Better-than-Expected ISM Services Index

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Following the release, the AUD/USD pair rallied briefly, by approximately 15-pips, in the minutes following the release. However, as markets digested the data, the Australian Dollar, as well as other riskier currencies such as the Canadian Dollar and the New Zealand Dollar, depreciated more than they had gained following the released. The AUD/USD traded as high as 1.0552 following the release, but dipped as low as 1.0506 within 30-minutes after. At the time this report was written, the pair was trading at 1.0522.

USD ISM Non-Manufacturing Composite: August 2008 to Present

U.S._Dollar_Gains_despite_Better-than-Expected_ISM_Services_Index_body_Picture_6.png, U.S. Dollar Gains despite Better-than-Expected ISM Services Index

Prepared by Christopher Vecchio

Although the headline figure suggests that the slide into another recession may be facing some resistance, some of the underlying components are not as promising. Similar to the reaction market participants had to the ISM’s factory index, in which risk-appetite was briefly boosted, risk quickly sold off upon a deeper reading of the index. Of the components, the group’s employment index fell to 51.6 from 52.5 in July, the lowest reading since September 2010. Although a reading above 50.0 denotes growth, it appears that the services employment sector is growing at a slower pace.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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