The Brandenburg Gate. Image source: Boris Breytman © 123RF.com
A sizable rebound in the underlying industrial activity was recorded in France and Germany over the previous month, which far exceeded the preliminary market forecasts.
The German Services PMI, in particular, delivered the greatest surprise, as the index reached 47.7 points. This marks a notable improvement from the 46.0 index points that were recorded in October. Moreover, last month's performance manifests a drastic improvement over the consensus expectations, which were projecting a likely deterioration to 44.1 index points.
Germany Services PMI. Image source: TradingEconomics.com
Today's findings of the Markit institute illustrate the first recuperation of Germany's services sector since July 2020, which also underlines better-than-expected prospects for recovery in 2021.
The news comes at a particularly favourable time for Christine Lagarde and the European Central Bank who recently decided to scale up drastically the total envelope of ECB's Pandemic Emergency Purchase Programme (PEPP).
While it is way too early to predict stable and even recovery in 2021, the stars seem to be finally aligning for the biggest economy in the Euro Area. Germany also played a notable role in brokering a much-needed deal in the Euro Parliament recently concerning the highly contentious topic of the bloc's budget.
All of these factors have contributed to the relentless rally of the single currency. As can be seen on the daily chart below, the EURUSD pair reached a crucial swing high earlier today, which was last touched on the 25th of April 2018.
The pair is becoming quite overbought, which means that traders would be looking for an opportunity to take advantage of a subsequent correction. Premature selling, however, entails a high degree of risk, as the general levels of market liquidity tend to fall dramatically by the end of the year. Consequently, the price action is likely to become much more erratic and unpredictable.
Moreover, the current market sentiment remains ostensibly bullish, which can be inferred from the Ichimoku Cloud indicator.
EURUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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