Closed Restaurants on the Champs Elysees in Paris. Image source: brunogiu © 123RF.com
In arguably the most important economic release from this week, the Markit institute just released the highly anticipated industry numbers in France and Germany for October. The two countries have the biggest economies in the Euro Area.
According to the findings of the reports, the French services sector registered the most substantial deterioration from a month prior, delivering worse-than-expected results. The services PMI index fell to 38.0 points versus 39.2 points expected. The index was recorded at 46.5 points in September.
French Services PMI. Image source: TradingEconomics.com
French manufacturing also registered a bigger-than-expected slump by falling to 49.1 index points versus 50.2 projected. Meanwhile, the only somewhat welcoming news was concerned with German manufacturing, which reached 57.9 index points versus 56.0 expected.
The Eurozone continues to suffer under the coronavirus fallout, as many countries within the bloc were compelled to reintroduce stricter containment measures in the last weeks due to an uptick in confirmed cases.
These hurdles to European growth are likely to persist in the near term, despite the encouraging vaccine news. Logistical problems could potentially slow down the distribution of a viable vaccine.
Meanwhile, the overbought euro seems poised to correct some of its recent gains in the near future. As can be seen on the 4H chart below, the EURUSD continues to thread just around the major resistance level at 1.18700 without forming a major breakout.
This behaviour entails a potential dropdown, seeing as how several bearish reversals already occurred the previous times that the price action was concentrated close to this major barrier.
The tighter Bollinger Bands entail diminished volatility, whereas the faltering bullish momentum, as underpinned by the MACD indicator, also supports the expectations for another bearish correction.
If the price action of the pair does indeed start to depreciate in the near future, the next most likely support could be found around the 23.6 per cent Fibonacci retracement level at 1.16839.
EURUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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