October Services PMI data disappointed, but the EURJPY continues to trade with a bid tone. The cross pair found support recently at previous levels and now gets ready to bounce to the next level of resistance.
Considering the US elections ahead of us, perhaps the wisest thing to do is to avoid being invested in a USD pair and focus on crosses. For this, the EURJPY provides interesting opportunities to both bulls and bears.
Today the PMI Services showed a sector that contracts further. In fact, the release came the weakest in the last five months. It reached 46.2 from 48 in the previous month, further diving below the 50 level. As a reminder, the 50 level represents the line in the sand when it comes to contraction or expansion within the sector.
But the data does not come as a surprise. The new COVID-19 resurgence in Europe makes it difficult for the services industry to grow. For instance, in Belgium all bars and restaurants are closed for a month, in many Spanish regions, similar decisions were taken, and other states contemplate further restrictions.
The second wave of infections proves to be much bigger than the previous one, now that winter reached Europe. As such, services are the first in line to suffer a correction.
For this reason, the Euro is actually higher on the board on bad to worse news. More precisely, the market already priced in the bad news and focuses on the next event.
Bulls may want to remain on the long side as long as the series of higher lows remain in place. As a target, the blue line shows the neckline of a possible triple top, and that is a place where bears will likely step in. To sell there, bears need a stop at the highs and a take profit at the measured move of a bigger degree head and shoulders pattern.
