On June 2, 2024, a stronger-than-expected ISM Services PMI, supported by an uptick in employment and inflation, has the potential to bolster hawkish expectations for the Federal Reserve, according to analysis from babypips [1]. The immediate market reaction may depend on broader risk sentiment, with the possibility that risk-on flows could lift commodity currencies such as the Australian dollar against the safe-haven U.S. dollar [1].
Technical analysis of USD/JPY reveals the pair consolidating around a key resistance zone following its recent climb. If bullish momentum persists, a breakout above resistance could lead to further gains, especially if the ISM Services PMI continues to reinforce U.S. dollar strength. Conversely, failure to maintain current levels could result in a retracement towards the next support area as traders digest the economic data [1]. Volatility is expected around the PMI release, particularly if the data surprises to the upside and shifts expectations regarding future Fed policy moves [1].
For AUD/USD, the pair is trading near a technical support level and is sensitive to U.S. economic releases. A stronger ISM Services PMI could initially weigh on AUD/USD due to increased Fed rate hike expectations, but a broad risk-on move might see the Aussie find support and push higher. Key technical levels include support near recent lows and resistance at the last swing high, with momentum indicators remaining mixed and suggesting choppy moves depending on the market's reaction to the data [1].
The ISM Services PMI release is highlighted as a high-impact event likely to drive volatility in both USD/JPY and AUD/USD. Traders are advised to monitor the release closely, watch for initial knee-jerk reactions, and seek confirmation from price action before taking positions. Broader market risk sentiment is crucial, as a strong PMI could spark risk-on flows benefiting commodity currencies like the Aussie, even as it temporarily lifts the dollar [1].
CONCLUSION
The stronger-than-expected ISM Services PMI is expected to drive volatility in USD/JPY and AUD/USD, with market direction hinging on risk sentiment and Fed rate expectations. Traders should remain vigilant for follow-through moves and manage risk carefully around this high-impact economic release. The event may temporarily strengthen the dollar, but could also support commodity currencies if risk-on flows dominate.