EUR/USD: Focus on US ISM non-manufacturing data

• EUR/USD's jump to three-week highs above 1.15 was short-lived as US non-farm payrolls data highlighted divergence in economic performance with Eurozone. 
• The pair's slow drip pullback from three-week highs will likely gather pace if the US ISM non-manufacturing beats estimates. That would trigger a debate on whether the Fed would have to adopt a hawkish tone again. 

The EUR/USD pair is currently trading at 1.1430 - down 84 pips from the three-week high of 1.1514 clocked on Jan. 31. 

The Federal Reserve signaled patience on rate hikes and counseled flexibility on the quantitative tightening program last Wednesday, sending the dollar lower across the board. 

The greenback, however, bounced back on Friday, pushing the EUR/USD well below 1.15 as the big beat on the January non-farm payrolls countered recession fears and underscored the growing divergence between the economic conditions in the US and Europe. 

Further, the stellar data left many wondering whether the Fed went too far in pleasing the markets. 

A better-than-expected US ISM non-manufacturing data could intensify that debate, forcing investors to price in the possibility of a single rate hike this year. In that case, the EUR/USD pair could fall back to its 50-day moving average (MA), currently at 1.1391. 

On the other hand, a big miss on the expectations could put a bid under EUR/USD, although growing evidence of a slowdown in Europe could limit upside. 

The ISM non-manufacturing data is scheduled for release at 15:00 GMT. Prior to that Eurozone is scheduled to report final PMI for January and retail sales for December. 

EUR/USD pivot points