AceTraderForex Jan 7: U.S. dollar retreats after weak ISM PMI data

[B]Market Review[/B] - 06/01/2014 [I]22:46GMT [/I]

[B]U.S. dollar retreats after weak ISM PMI data[/B]

The single currency turned higher on Monday on short-covering together with dollar’s broad-based weakness as data showed service sector activity in the U.S. slowed unexpectedly in December, led lower by a drop in new orders.

During the day, although the single currency remained under pressure in Asia and penetrated Friday’s low at 1.3582 to a fresh 1-month trough at 1.3572 ahead of European opening, lack-of-follow through selling prompted short-covering and euro later rebounded to 1.3622 in European trading and then further to 1.3653 in New York morning after weak U.S. data.

The Institute of Supply Management said its non-manufacturing purchasing manager’s index declined to 53.0 in December from 53.9 in November, worse than the forecast of an increase to 54.5.

Versus the Japanese yen, dollar tumbled in Asian trading after an initial rise to 104.95 with sharp falls in Japan equities market bolstering safe haven demand for the yen (Nikkei 225 index close down by 2.35% to 15,908.88). Dollar dropped to as low as 104.15 but failure to penetrated last Friday’s low at 104.08 prompted short-covering and dollar later climbed back to 104.84 in New York before falling to 103.91 again after disappointing U.S. economic reports.

Cable ratcheted lower in Asia after penetrating Friday’s low at 1.6395 and dropped to a fresh 1-week low at 1.6337 in European morning after data showed Markit/CIPS Services Purchasing Managers Index declined to a six month low of 58.8 in December from 60.0 in November, however, renewed weakness of dollar versus European currencies lifted price later in the day and cable rose above New Zealand high of 1.6420 to 1.6434 in New York morning before easing.

On the data front, euro zone showed the bloc’s services PMI came in at 51.0 in December, unchanged from the preliminary estimate and down slightly from 51.2 in November. Separate reports showed that activity in Spain’s private sector expanded at the fastest rate in 77 months, but activity in France and Italy contracted last month.

In other news, data over the weekend showed that activity in China’s services sector slumped to the weakest level since August 2011 in December, fueling concerns over the outlook for growth in the world’s second largest economy.

[B]Data to be release on Tuesday: [/B]

Australia trade balance, France consumer confidence, Germany unemployment change, unemployment rate, EU PPI, CPI, U.S. trade balance, Redbook retail sales, Canada trade balance, import, export and Ivey PMI.