The US dollar gains strength as ISM services PMIs are higher than expected, with attention on NFP

USD continues gains for a second day after mixed signals from ADP and ISM Services PMIs.
Business activity in the U.S. services sector picked up in May, and the ISM Services PMI showed signs of recovery in April.
Markets are bracing for nonfarm payrolls and wage inflation data to provide additional insight into the U.S. economy.

The US Dollar Index (DXY) continued to rise on Wednesday despite mixed signals about the US economy. Solid service sector performance, combined with lower-than-expected private sector employment data, caused moderate market jitters. However, the overall outlook for the US economy remains resilient.

All eyes are now on upcoming labor market data such as nonfarm payrolls, wage inflation and jobless claims, which will provide deeper insight into the health of the U.S. economy on Friday. Markets will monitor these signals closely to adjust their assumptions regarding Federal Reserve (Fed) rate cuts.

Daily Market Move Summary: DXY Increases Profits Amid Mixed Economic Signals

The ISM Services PMI for May rose to 53.8, beating market expectations of 50.8 and marking a significant boost from April’s reading of 49.4.
ADP’s Employment Change Report shows that U.S. private sector employment increased by 152,000 in May.
This boost is lower than the market expected PLN 173,000. and lower than the corrected data by 188 thousand. introduced in April.
The probability of interest rate cuts in June and July remains low, while in September it is around 60%.

DXY Technical Analysis: USD Rebound Despite Continued Bearish Mood

Even though the DXY index has fallen below 20,100 and the 200-day uncomplicated moving averages (SMA), there have been signs of a possible recovery over the past two sessions. The relative strength index (RSI) has risen but remains below 50, while the moving average convergence divergence (MACD) is showing lower red bars, reflecting some buying interest.

Despite the overall negative market sentiment, bulls are gradually gaining ground. If they can reconverge the lost 100- and 200-day SMAs at 104.40, it would significantly improve the outlook for the DXY Index.