EUR/USD spikes to fresh session peaks on USD drop

The EUR/USD pair ran through fresh bids in the NA session and surged to 1.1893, where it renewed its daily high. At the moment, the pair is trading at 1.1880, up 0.2% on the day.

The pair's recent leap seems to be caused by a heavy selling pressure witnessed on the greenback following some disappointing macro data from the U.S. Although the Services Business Activity Index released by the IHS Markit improved to 54.7 in July from 54.2 in June, the Institute for Supply Management's version of the service sector PMI dropped to 53.9 from 57.4 for the same time period. The employment sub-index of the ISM report also decreased by 2.2 points to 53.6.

After the data, the US Dollar Index quickly retraced all of its daily gains and plummeted to 92.56. As of writing, the index was at 92.63, losing 0.13% on the day. Investors seem to be ignoring the positive data and look for excuses to continue selling the US dollars. Nothing seems to be helping the greenback heave a sigh of relief. Tomorrow's NFP report could be the next significant catalyst for the greenback. Markets expect the nonfarm payroll growth to decrease to 183K from 222K in July. In addition to the NFP data, investors will watch the change in average hourly earnings as well to find a clue regarding the wage inflation.

• US NFP preview: Looking for 195K in July - Wells Fargo
• US: Strong jobs but weak wages - Nomura

Technical outlook

The RSI on the H4 chart reached the 70 mark once again, showing short-term technical overbought conditions for the pair. However, even the technical corrections remained fairly limited in the last couple of weeks as the pressure on the DXY remained alive. 1.1905 (Aug. 2 high) could be seen as the first technical resistance ahead of 1.1950 (Jan. 4, 2015, high) and 1.2000 (psychological level). On the downside, supports align at 1.1800/1.1790 (psychological level/Aug. 2 low), 1.1720 (Jul. 31 low) and 1.1620 (Jul. 21 low).

Today's data from the U.S.

• US: Weekly initial claims was 240,000, a decrease of 5,000 from previous week
• US: Services Business Activity Index registered 54.7 in July, up from 54.2 in June - Markit
• US: Composite PMI Output Index rose to 54.6 in July, up from 53.9 in June
• US: Economic activity in non-manufacturing sector grew in July - ISM
• US: New orders for manufactured goods in June increased 3% to $481.1 bln