FX.co ★ 03.12.2020: Overbought market poses downside risk to EUR. Outlook for EUR/USD, GBP/USD

Today's macroeconomic calendar is full of important releases, which can have a severe impact on market sentiment. In our informational review on InstaForex TV, you will find out how the markets have responded to the news and what prospects are opening up for the euro/dollar and pound/dollar pairs.

As expected, the final data on business activity in the UK services sector as well as the composite PMI turned out to be slightly better than the preliminary estimates. In particular, the UK services Purchasing Managers' Index slipped to 47.6 from 51.4, while economists predicted a decline to 45.8 in an earlier estimate.

The composite PMI fell to 49.0 from 52.1, which is a smaller drop than an initial estimate of 47.4. Nevertheless, the movement of the British pound is still sluggish.

Apparently, investors remain cautious, still trying to figure out what the outcome of negotiations between the European Union and the United Kingdom would be. Yesterday, rumors about Brexit talks caused a stir in the market. Besides, today's statistics could not support the pound sterling. Although the indices beat market expectations, they fell below the 50 level that divides growth from contraction. Thus, the British economy is still experiencing difficulties.

The situation with business activity in the euro area is rather similar. Eurozone services PMI came in at 41.7, down from the previous figure of 46.9, while economists predicted 41.3.

The composite PMI slipped to 45.3, down from October’s 50.0 but slightly better than the earlier flash reading of 45.1.

Eurozone retail sales unexpectedly rose by 4.3%, surpassing the previous 2.2% and the expected 2.7%. Such an impressive growth in consumer activity offsets the negative caused by the deflation the region has been experiencing for the fourth consecutive month. Moreover, it also raises hope for an early recovery in prices. However, the foreign exchange market is standing still. Volatility is extremely low. Therefore, the only hope is that statistics from the United States will revive the market.

Moreover, today’s macroeconomic calendar includes the final data on business activity in the United States. The difference is that the indices are expected to rise. Moreover, in contrast to Europe, there is no reason to doubt that the final data will coincide with the preliminary estimates.

In addition, market participants will obtain the data on jobless claims, which is expected to once again show that the US labor market continues to recover. Although continuing claims for unemployment benefits are likely to edge lower, the US dollar will hardly rise as traders are ready for disappointing figures from the US Labor Department to be released tomorrow.

The euro/dollar pair continues to move in an upward trend. The price has already overcome the psychological resistance level of 1.2000 and now it is likely to hit the next level of 1.2200. However, strong price spikes at the beginning of the trading week are an overbought signal. This may push the pair into a downward correction.

The pound/dollar pair has been quite active lately. As a result, the pair slipped by more than 150 pips.

Strong spikes are triggered mainly by the news releases. That is why the price was able to recover quickly.

The pair rebounded from 1.3300 and then returned to the level of 1.3400. Thus, the boundaries of the previously broken sideways channel were confirmed.

Now the pound/dollar pair is likely to go to the level of 1.3440. In case the price consolidates above 1.3440 on the H4 chart, the way to the local high of September 1, that is the level of 1.3482, will open.

www.instaforex.com

FX Analytics - www.instaforex.com/forex_analytics

Forex Calendar - www.instaforex.com/forex_calendar

Forex TV from InstaForex - www.instaforex.com/instaforex_tv

Forex charts - www.instaforex.com/charts

Instant account opening - www.instaforex.com/fast_open_live_account

Forex Trading Contests - www.instaforex.com/forex_contests

List of official InstaForex blogs:

www.facebook.com

www.instagram.com

twitter.com

#forex_news #european_session #instaforex_tv