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Forex - EUR/USD drops on upbeat U.S. service-sector data

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Shutterstock photo - - The dollar firmed to 9-month highs against the euro on Tuesday after industry data revealed the U.S. service sector was far busier in July than markets were anticipating.

In U.S. trading, EUR/USD was down 0.39% at 1.3369, up from a session low of 1.3358 and off a high of 1.3425.

The pair was likely to find support at 1.3298, the low from Nov. 7, 2013, and resistance at 1.3445, Friday's high.

The Institute of Supply Management reported earlier that its services purchasing managers' index jumped to 58.7 in July from 56.0 in June.

Economists had expected the index to tick up to 56.3, and the better-than-expected figure sparked demand for the dollar as investors adjusted their timetables as to when the Federal Reserve may hike interest rates.

The new orders component of the index rose to 64.9 in July from 61.2 in June, the highest reading since August 2005. The employment index rose to 56 from 54.4 in June, the fifth consecutive month of growth.

Also in the U.S., the U.S. Census Bureau reported that factory orders climbed by 1.1% in June, beating forecasts for a gain of 0.6%. Factory orders fell by 0.5% in May.

Meanwhile in Europe, the single currency softened after data revealed that the service sector activity in Italy grew at a slower pace than expected in July, one month after hitting the highest level since November 2010.

Italy's services purchasing managers' index slowed to 52.8 in July from 53.9 in June, according to Markit Economics. Economists had expected a reading of 54.0.

Service-sector activity in German and Spain grew last month, while the expansion in the French service sector remained marginal.

The euro zone's services PMI came in at 54.2, missing estimates for a 54.4 reading.

The data added to the view that the recovery in the euro zone is losing momentum as investors looked ahead to the outcome of the European Central Bank's monetary policy meeting on Thursday.

A report late last week showing that the annual rate of inflation in the euro area slowed to 0.4% in July from 0.5% in June added to concerns over growing deflationary pressures in the region.

A separate report on Tuesday showed that euro zone retail sales rose by 0.4% from a month earlier in June, in line with forecasts, though the figure did little to bolster the euro against a surging dollar..

Elsewhere, the euro was down against the pound, with EUR/GBP down 0.44% at 0.79258, and down against the yen, with EUR/JPY down 0.14% at 137.47.

In the U.K., industry data revealed the service sector grew to 59.1 in July, beating expectations for a 57.9 reading.

On Wednesday, Germany is to publish a report on factory orders, while the U.S. is to publish data on the trade balance. offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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