ISM Services PMI Preview: US service sector expected to expand in August

On Thursday, the Institute for Supply Management (ISM) will release its August gauge of the US service sector, known as the Services Purchasing Managers Index (PMI). Market expectations point to a slight increase to 54.3 from July's 54.1, indicating the sector's resilience in the face of rising inflation pressures. However, the ISM Employment Index, which gauges hiring momentum, showed a weaker 47.4, down from July's 51.2.

Yet, New Orders and Prices Paid Index both showed positive signs, suggesting demand may be picking up pace. Amid ongoing inflation concerns, the Fed remains cautious about future rate hikes, with Chair Kevin Warsh emphasizing the issue's importance. A result in line with expectations is unlikely to cause significant movement in the US Dollar, but a softer-than-expected print could dispel confidence and prompt investors to reduce USD holdings, fearing a slowdown in growth.

FXStreet's Pablo Piovano suggests that a weaker-than-expected report could test the minor support at 1.1511, while a strong one might push the USD to challenge the August peak at 1.1711. Meanwhile, the EUR/USD pair has seen a decline since breaking below its 200-day SMA, with support near the 100-day SMA at 1.1570 and a potential deeper retracement to the August 13 minor support at 1.1511.