EUR/USD eases from tops, still well bid above mid-1.1000s post-US ISM PMI

• Upbeat US ISM non-manufacturing PMI complements strong ADP report.
• Surging US bond yields lend some support to the USD and capped gains.
• Traders now start repositioning for Friday’s closely watched NFP report.

The EUR/USD pair maintained its strong bid tone and climbed to one-week tops in the last hour, albeit quickly retreated few pips in reaction to upbeat US ISM PMI.
 
After an initial dip to the vicinity of the key 1.10 psychological mark, the pair regained positive traction and built on this week’s solid rebound from 28-month lows. The prevailing US Dollar selling bias, despite a strong intraday upsurge in the US Treasury bond yields, was seen as one of the key factors driving the pair higher.

Upbeat US data capped the up-move

The USD bulls seemed rather unimpressed by Thursday’s stronger US ADP report, showing that the private-sector employers added 195K jobs in August as against 149K expected. This was followed by the release of ISM non-manufacturing PMI, which jumped to 56.4 in August as compared to 54.0 anticipated and 53.7 previous.
 
The upbeat data, to some extent, might have forced investors to trim their bets for an aggressive Fed policy easing at the upcoming meeting in September. This was evident from a strong follow-through upsurge in the US bond yields, which provided a much-needed respite to the USD and kept a lid on the up-move.
 
It will now be interesting to see if the pair is able to hold on to its gains or witnesses some renewed weakness as traders now start repositioning for Friday’s keenly watched official US monthly jobs report – popularly known as NFP – which might influence the Fed’s near-term policy outlook and eventually provide a fresh directional impetus.

Technical levels to watch