USD bulls were left with little to get excited about from the latest data this week. The US ISM Non-Manufacturing index for January came in below expectations at 56.7 versus 57 expected.
This latest reading shows that the services sector in the US grew at its slowest pace of the last six months, as nine of the surveyed industries said business improved over the month, while eight reported a decline.
Services Sector Still Expanding
However, while it came in lower than expected, the reading was still above 50 which signals the neutral level. This indicates that the services sector is still expanding despite businesses reporting slower growth in the new order, production, and employment.
Impact From Shutdown Expected To Fade
Indeed, much of the decline is likely due to the US government shutdown which only ended recently. Hence, the market will be keen to see if we get a bounce back in February’s reading.
Anthony Nieves, chairman of the survey, said that despite the impact of the shutdown, businesses are “mostly optimistic about overall business conditions.”
Market Reaction & Technical Perspective
Despite the weaker than expected data, US equities continue to trade higher. This comes as equity investors still have a green light following last week’s FOMC meeting, where the Fed told investors that hikes have paused for now as it monitors incoming data and global developments.
The S&P now has its sights fixed firmly on a test of the next key resistance at the 2801.65 level. Any retracement lower from here should be support at a retest of the 2604.37 level, keeping focus on further upside.