Services Growth Cools Inflation Risks Persist
Demand improved, as the New Orders Index climbed to 60.6 from 58.6. After the release, the US Dollar Index (DXY) fell below 100.00 to fresh two-day lows. Ahead of the report, the ISM Services PMI had been scheduled for 14:00 GMT and was expected at 55.0 versus 56.1. The services sector is described as about two-thirds of the US economy, with focus also on employment, orders, and prices. EUR/USD traded up 0.25% near 1.1544 in late European trade. Levels cited included resistance near 1.1566 and 1.1600, then 1.1667, with support near 1.1500 and 1.1411; RSI remained in the 40.00–60.00 range. We are seeing a familiar pattern that reminds us of the market back in early 2025. Just as we saw then, the latest March 2026 ISM Services data shows a slight cooling in the sector, coming in at 53.5. However, the inflation component remains a major concern, with the Prices Paid index still elevated at 68.9.Watching Key Dollar Levels And Volatility
Back in 2025, this mix of data pushed the US Dollar Index below the key 100.00 support level. We are now watching the 103.00 level closely as the current market prices in a less aggressive Federal Reserve. Any further signs of economic softness could trigger a similar break in the dollar. The conflicting signals from slowing growth and persistent price pressures are creating uncertainty, which points towards higher market volatility in the coming weeks. For options traders, this suggests that long volatility strategies could be profitable. Consider buying straddles on the EUR/USD, as this pair will react sharply to any change in Fed expectations. The weak hiring conditions we saw in the 2025 report, with the Employment Index dropping to 45.2, are a critical piece of the puzzle. Now, with the national unemployment rate having edged up to 4.1% in the first quarter of 2026, the labor market is showing clear signs of softening. This makes it harder for the Fed to stay aggressive, adding weight to bearish dollar positions. Given this outlook, we believe that short positions on US dollar futures are becoming more attractive. A decisive break below the 103.00 level on the DXY would be a strong signal to add to these positions. Traders should watch for this as a key trigger in the next one to two weeks. Create your live VT Markets account and start trading now.
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