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The US dollar showed strength at the start of the North American trading week, with USD/JPY rising 0.59% after rebounding from a key technical level near 160.446. The pair broke above the 100 and 200-hour moving averages, approaching 162.30, a level not seen since 1986. Meanwhile, EUR/USD and GBP/USD declined slightly, with EUR/USD trading below its 100-hour MA at 1.1416 and GBP/USD retreating toward the 50% Fibonacci retracement of its recent decline. The upcoming US ISM Services PMI data is expected to show a modest slowdown to 54.0 from 54.5, remaining in expansion territory. This data, along with employment and business activity indices, will influence USD momentum.
The dollar's strength is driven by technical resilience in USD/JPY and broader USD demand amid mixed economic signals. The ISM Services PMI, while expected to remain in expansion, may highlight subdued growth due to high prices and low consumer confidence. Traders will watch how markets react to the data, particularly if the USD can maintain gains against majors. Weakness in EUR/USD and GBP/USD suggests caution in the broader forex market.
For MENA investors, the USD's performance against the yen and majors could impact Gulf USD-based assets and commodity-linked currencies. The key focus remains on the ISM data and its implications for Fed policy expectations. If the PMI confirms a slowdown, it might temper USD gains, but a stronger-than-expected reading could reinforce bullish momentum. Traders should monitor the 162.00 level for USD/JPY and the 1.1400 support for EUR/USD.
