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Markets just received the report for the monthly ISM Services PMI report, and despite a beat on the Global PMI report (55.1 vs 54.6 expected – less Market-moving), the more influent Services data missed by a decent margin.

The data came in at 50.1, just at the brink of contraction territory and with the 51.5 consensus, Equity markets have started to show some signs of retraction.

Reactions also point to some selling in the US Dollar after temporarily breaching the 99.00 handle – The DXY now trades back into the high 98.00 territory.

We'll be taking a look at S&P 500 charts to see what's into play as the US Dollar and US Equity correlation is growing again.

US ISM Services PMI report

US Services PMI and its components, August 5, 2025 – Source: InvestingLive.com

7 out of the 10 components influencing the main release have fallen in the monthly report, further confirming that Tariffs are starting to have an impact on American activity.

Tariffs have by the way seen quite a few mentions in today's report, on 9 different occasions. Central Banks will be looking mostly at the impact of tariffs on Prices;

Different sectors including Healthcare, Agriculture, education and transporting have mentioned that "Tariffs are now starting to show up in pricing, and we are seeing increases across the board.”

S&P 500 4H Chart

S&P 500 4H Chart, August 5, 2025 – Source: TradingView

Despite showing a strong pullback higher, US Equities are starting to form some lower highs on higher timeframes.

Looking at the bigger picture, the price action had been evolving in two different upward channels:

• The first being the April Liberation Day tariff lows, now broken after forming a double top (see on chart: Lower Bound trendline in black)
• The second (in Blue), still valid, has shown a rebound at the lows of its own lower bound, supported by the 4H MA 200 – The NFP lows are at 6,216 on the S&P CFD.

Sellers are stepping in after the missed PMI report and prices are now entering the key 6,300 Support Zone.

S&P 500 30m Chart

S&P 500 30m Chart, August 5, 2025 – Source: TradingView

Looking closer, the ongoing selling is strong with prices moving below the 50 and 200 MAs.

RSI momentum is getting oversold on lower timeframes, therefore reactions around the 6,300 psychological handle will be essential to monitor – down close to 0.50% on the session, we are currently trading in this region.

Key levels to place on your charts:

• 6,441 ATH on CFD (6,427 on SPX Index)
• FOMC Lows resistance Zone 6,350
• 6,300 Key Support – Current Pivot (+/- 15 points)
• NFP Lows and lower bound of May Channel – 6,220 to 6,240

Safe Trades!

The New Zealand dollar has edged lower on Tuesday. In the North American session, NZD/USD is trading at 0.5892, down 0.27% on the day.

New Zealand employment expected at -0.1%

New Zealand releases the employment report for the second quarter on Wednesday, with the markets braced for worsening data for the labor market. Employment change is expected to contract by 0.1%, down from a 0.1% gain in Q1. The unemployment rate, which was unchanged at Q1 at 5.1%, is expected to rise to 5.3% in Q2, which would be the highest rate since Q3 2020.

The New Zealand economy sustained a recession last year and the labor market has softened. Global demand for New Zealand exports has fallen as trade tensions remain high due US trade policy. The softening labor market and weak global conditions have raised the downside risk to inflation, which supports the case for the Reserve Bank of New Zealand to lower rates on Aug. 20.

The Reserve Bank has been aggressive in the current easing cycle, cutting rates by 225 points in just 12 months, to a current cash rate of 3.25%. Bank policymakers will be keeping a close eye on Thursday's inflation expectations, which accelerated to 2.3% in the second quarter. The release shouldn't complicate the RBNZ's plan to cut rates at the next meeting, providing that inflation expectations do not rise significantly.

US ISM Services PMI expected to improve

The ISM services PMI is expected to accelerate to 51.5 in July, compared to 50.8 in June. The services sector is back in expansion territory after a rare contraction (49.9) in May. Services purchase managers pointed to the uncertainty over tariff impacts as their number one concern.

NZD/USD Technical

• NZD/USD is testing support at 0.5894. Below, there is support at 0.5881
• 0.5913 and 0.5926 are the next resistance lines

NZDUSD 1-Day Chart, Aug. 4, 2025

The ISM Services index gave back much of the previous month's gain, falling 0.7 points to 50.1 in July. This was well below the market consensus forecast for an improvement to 51.5. However, the number of industries reporting growth in July was a tick higher at 11 out of 18, compared to 10 in the previous two months.

Business activity fell 1.6 points to 52.6, while new orders fell by one point to 50.3. The backlog of orders improved but remained in contraction (up 1.9 points to 44.3).

The employment index held in contractionary territory, falling 0.8 points to 46.4 – its lowest level since March.

The supplier deliveries index rose 0.7 points to 51. The July uptick points to a slower supplier delivery performance. The prices paid index also shot up 2.4 points to 69.9 – the highest level since late 2022.

Key Implications

The pullback in the ISM services index suggests that activity in the services sector expanded at a slower clip in July, with the headline index only a hair above the 50-point contractionary threshold. There were additional blemishes in the report, including an increase in the prices paid index to the highest level since late 2022, and the fact that the employment index held in contractionary territory for the second month in a row – a theme that's in tune with a softened overall employment backdrop.

The softer trend in ISM services, coupled with an even worse performance in its manufacturing counterpart, are indicative of slowing U.S. economic activity – a theme that we anticipate will become a more entrenched in the third quarter. While the Fed will have to tread carefully with ongoing signals of an uptick in price pressures ahead, growth-related concerns are likely to dominate and should get the Fed moving when it comes to easing monetary policy, with market odds having increasingly positioned for a September rate cut following the weak July payrolls report.

The Dow Futures (YM) cycle, initiated from the April 2025 low, has reached a mature phase and could conclude soon. We anticipate one final push higher to complete the impulsive cycle from that low. As shown on the one-hour chart, wave (3) of this impulse peaked at 45,312. The subsequent wave (4) pullback concluded at 43,467, forming a zigzag Elliott Wave structure. From wave (3), wave A dropped to 44,418, wave B rallied to 44,852, and wave C fell to 43,467, finalizing wave (4). The Index has since turned upward in wave (5), but it must surpass the wave (3) high of 45,312 to eliminate the possibility of a double correction.

Currently, wave (5) is unfolding as a lower-degree impulse. From wave (4), wave ((i)) reached 43,864, followed by a wave ((ii)) pullback to 43,542. The Index then advanced in wave ((iii)). From wave ((ii)), wave (i) hit 43,997, and wave (ii) corrected to 43,881. We expect a few more highs before wave 1 of (5) completes. A wave 2 pullback should follow, but the Index will likely resume its ascent afterward. As long as the pivot low at 43,467 holds, dips should attract buyers in 3, 7, or 11 swings, supporting further upside in the near term.

Dow Futures (YM) – 60-Minute Elliott Wave Technical Chart:

YM_F – Elliott Wave Technical Video:

https://www.youtube.com/watch?v=Hg0UbRNU6HE

As the XBR/USD chart shows, Brent crude oil has made two significant moves recently:

1. Last week’s price increase (A) followed President Donald Trump’s intentions to impose tariffs on India due to its purchases of Russian oil. This could have disrupted established oil supply chains.
2. The price decline (B) may have been driven by both the decision of OPEC+ countries to increase production and reports of a weakening US labour market.

Thus, there is reason to believe that the more than 4.5% decline in Brent crude oil prices since the beginning of August reflects market participants’ scepticism about sustained high oil prices:

→ this has a negative impact on the US economy (JP Morgan analysts raised concerns about recession risks this week);

→ increased activity from oil producers may offset supply chain disruption risks.

Technical Analysis of the XBR/USD Chart

From a technical analysis perspective, Brent crude oil has dropped to a key support level (marked in blue), which was previously active in July. A rebound from this line could happen – in such a case, the price might face resistance at the Fair Value Gap area (marked in orange), formed between:

→ $70.81 – a support level active in late July, which was broken;

→ the psychological level of $70.00.

Attention should also be paid to price behaviour around the $69.00 level (indicated by arrows) – it quickly switched roles from support to resistance, indicating aggressive bearish sentiment. Given this observation, a potential bearish breakout attempt below the blue support line cannot be ruled out.

However, whether this scenario materialises will largely depend on developments in geopolitical risks and tariff agreements.

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U.S. ISM Services PMI fell from 50.8 to 50.1, below consensus of 51.5. Business activity declined from 54.2 to 52.6, while new orders dropped from 54.2 to 50.3. Notably, new export orders fell sharply from 51.1 to 47.9, marking the fourth contraction so far this year. The employment index also weakened further, down to 46.4 from 47.2.

The only upside surprise came from the Prices Paid index, which jumped from 67.5 to 69.9 — the highest reading since October 2022. The inflation gauge has now stayed above 60 for eight consecutive months, signaling persistent pricing pressure across the services economy.

According to ISM, the faster expansion in prices alongside continued employment weakness is a "worrisome development," even as the overall index barely remains in expansion territory. The July reading corresponds to a meager 0.5% annualized GDP growth.

Full US ISM services release here.

Canada's trade deficit widened from $5.5 billion in May to $5.9 billion in June.

Exports rebounded for a second consecutive month, albeit modestly (+0.9% m/m). This still leaves Canadian exports almost 10% lower than March's pre-plunge levels. Exports to the U.S. also jumped (3.1% m/m) for a second consecutive month. Export growth was seen in 6 of 11 product sections, with shipments of energy products (+3.8% m/m) making the largest contributions. A 3.8% m/m decrease in metal and non-metallic exports and double digit drops in steel & aluminum exports tempered the headline gain.

Goods imports on the other hand were up 1.4% m/m in June after three consecutive months of contracting. Notably, the gain was very narrowly-based, with a majority coming from sizeable 27.7% m/m increase in industrial machinery, equipment and parts imports.

In volume terms, merchandise exports were down 0.4% m/m while imports increase 1.5% m/m in June.

Canada's merchandise trade surplus with the United States widened slightly to $3.9 billion as of June, as exports gained more than imports.

Exports to countries other than the United States pulled back slightly but remain elevated at ~30%.

Key Implications

With a full quarter of trade data in the books, net trade is expected to put a substantial dent into Q2 GDP growth, something we had anticipated for several months. Trade weakness and broader trade uncertainty show no signs of abating–not least due to Canada and U.S.' inability to strike a new trade deal last week leading to a higher 35% tariff on some goods. On a positive note, Canadian export rotation into non-U.S. markets is appearing to have some staying power, a trend policymakers would like to see persist.

It is hard to fall off the floor, and Canadian exports are widely expected to slowly continue their bounce back from the lowest level in nearly five years in April. It is the sectors impacted by tariffs– steel, aluminum, autos, and energy–that continue to disproportionally bear the brunt of the shock. Meanwhile, we may be nearing the upper-end of USMCA compliant exports, as the compliance rate of Canadian goods crossing the border has flatlined at around 60% for the last three months.

Dollar is trading mixed in early US trading on Tuesday, reflecting a cautious tone across the broader market. Treasury yields appeared to have found a foothold, with 10-year stabilizing around 4.2%, helping to curb recent Dollar softness. Traders appear to be waiting for the next catalyst — likely today’s ISM Services data — to drive a more decisive move in yields and FX.

US President Donald Trump’s wide-ranging CNBC interview, which touched on Fed leadership and upcoming tariffs, stirred little immediate market reaction. Still, the content could hold longer-term implications for monetary policy and trade. Trump indicated he has narrowed the list of potential Fed chair successors to four names, excluding current Treasury Secretary Scott Bessent. The field is believed to include Kevin Warsh, Kevin Hassett, and possibly Fed Governor Christopher Waller — all considered policy doves.

Trump didn’t rule out the possibility of appointing a “shadow chair” to undermine Jerome Powell before his term ends in May 2026. That comment, while speculative, will likely raise eyebrows among investors concerned about central bank independence. The identity and stance of the next Fed chair — or their perceived influence — could become a growing driver of market expectations in the coming months.

Currency markets remain broadly indecisive. Yen is the weakest performer today sofar, reversing early gains seen during the Asian session. Euro follows as the second-softest, while the Kiwi also underperforms. Sterling is leading the day, boosted by relative strength in crosses, with Aussie and Dollar rounding out the top three. Swiss Franc and Canadian Dollar are sitting in the middle of the pack.

On the trade front, Trump revealed plans to impose new tariffs on semiconductors and chip imports, citing the need to re-shore manufacturing. He said the announcement could come “within the next week or so,” but offered few specifics.

Meanwhile, Switzerland is scrambling to head off a 39% tariff hike on its exports to the US. Swiss President Karin Keller-Sutter and Economy Minister Guy Parmelin have flown to Washington to hold emergency talks with US officials. The Swiss government has offered to improve its trade terms, but it remains unclear whether the outreach will lead to a meeting with Trump or concrete concessions.

European data wrap: Eurozone PMI leaves room for one more ECB cut

In the Eurozone, PPI rose 0.8% mom and 0.6% yoy in June, slightly missing monthly expectations but beating on the annual rate. Energy prices surged 3.2% on the month, offsetting modest gains elsewhere. Intermediate goods prices slipped -0.2%, reflecting some ongoing input cost disinflation in the manufacturing sector.

More encouragingly, Eurozone PMI Services was finalized at 51.0 in July, up from June’s 50.5. Composite PMI rose to 50.9 from 50.6. Germany and Italy showed gains, while Spain led the bloc at a five-month high of 54.7. France, however, slipped to a three-month low of 48.6. HCOB noted that services inflation is easing, with input costs growing at the slowest pace in nine months. That, alongside decelerating wage growth, strengthens the case for one more ECB rate cut in the second half of the year.

In the UK, the tone was more cautious. July’s PMI Services was finalized at 51.8, down from June’s 52.8, while Composite PMI eased to 51.5 from 52.0. Despite softer prints, S&P Global noted that business confidence improved, supported by receding US tariff concerns and hopes for domestic rate cuts later this year.

BoJ minutes hint at hikes post-tariff deal, AUD/JPY extends decline

BoJ’s June meeting minutes, released today, confirmed that several policymakers were open to resuming rate hikes once trade uncertainty subsides. While the minutes are somewhat dated — the meeting took place before the announcement of the US–Japan trade agreement — they reveal a growing consensus that the central bank may return to a normalization path sooner than previously expected. Markets are now turning to Friday’s Summary of Opinions from the more recent July meeting, which should reflect a more upbeat outlook following the tariff deal.

Some BoJ members noted that as wages remain firm and inflation slightly exceeds expectations, the Bank would likely "shift away from the current wait-and-see approach and consider resuming rate hikes, if trade friction de-escalates" Others emphasized that while the BoJ should pause rate hikes for now due to uncertainty, it must stay “flexible and nimble,” ready to resume hikes depending on US policy and global developments.

China’s Caixin Services PMI surges to 52.6, on stronger demand and renewed optimism

China’s Caixin Services PMI jumped sharply from 50.6 to 52.6 in July, well ahead of expectations at 50.4, marking the fastest pace of expansion since May 2024. PMI Composite, however, fell from 51.3 to 50.8 as dragged down by weak manufacturing.

According to S&P Global’s Jingyi Pan, the rise was driven by better domestic demand and a notable improvement in external demand, with new export business expanding for the first time in three months. Business sentiment also improved, reaching the highest level since March.

Firms also began hiring again, albeit mostly part-time. Importantly, companies felt confident enough to raise output charges for the first time in six months — a sign that inflation pressures are being more easily passed on to clients.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 146.60; (P) 147.35; (R1) 147.82; More...

USD/JPY recovered after brief dip to 146.61 and outlook is unchanged. Intraday bias stays neutral at this point. As long as 145.84 support holds, larger rebound from 139.87 is still in favor to continue. On the upside, above 148.07 minor resistance will bring stronger rebound back to retest 150.90. However, on the downside, firm break of 145.84 support will argue that whole rise from 139.87 might have already completed. Deeper fall should then be seen to 142.66 support for confirmation.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Daily Pivots: (S1) 1.1549; (P) 1.1573; (R1) 1.1596; More...

Intraday bias in EUR/USD stays neutral at this point. On the upside, above 1.1596 will affirm the case that correction from 1.1829 has completed with three waves at 1.1390. Further rally should then be seen to retest 1.1788/1820 resistance zone. On the downside, break of 1.1390 will resume the correction to 38.2% retracement of 1.0176 to 1.1829 at 1.1198 instead.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.