23.10.2020: Euro closes trading week in triumph. Outlook for EUR/USD and GBP/USD.

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Today, European currencies skyrocketed amid a preliminary report on the eurozone business activity. The fact is that the published data significantly exceeded forecasts.Thus, the eurozone services PMI dropped to 46.2 points from 48.0 points. Economists had expected a smaller decline to 47.2 points. At the same time, business activity in the manufacturing sector unexpectedly jumped to 54.4 points from 53.78 points whereas analyst had foreseen a decrease to 52.9 points. As a result, the eurozone composite PMI just inched down to 49.4 points from 50.4 points that was well above the forecast for a drop to 48.5 points.
In the UK, business activity showed worse performance. Thus, the UK services PMI slid to 52.3 points from 56.1 points in the previous period. Economists had expected a smaller decline to 53.8 points. Business activity in the manufacturing sector dropped to 53.3 points from 54.1 points that was above the forecast for a deeper decrease to 52.9 points. As a result, the UK composite PMI shed to 52.9 points from 56.5 points. Analysts had predicted the reading of 53.6 points. Such a slump was mainly caused by a decline in the services sector.
Notably, the British pound received additional support from the UK retail sales figures. The indicator advanced by 4.7% compared to a rise of 2.7% in the previous period. Economists had expected an increase of no more than 3.7%. As a rule, strong figures in retail sales boost business activity in the services sector.
Preliminary figures on the US business activity will hardly change the upward trend of European currencies. The fact is that the US services PMI may decline.
As expected, the euro/dollar pair slowed down in the area of 1.1850/1.1900 and dropped to the level of 1.1810.
The current decline is considered to be a short-lived phenomenon. If the pair breaks the area of 1.1850/1.1900 it may hit a new local high. Otherwise, the price will fluctuate between the levels of 1.1750/1.1850 for a long time.
At the same time, the pound/dollar pair became overbought during its surge logged on October 21. After that, we saw a technical correction to the level of 1.3080.
If the pair hits again the local high of 1.3175, it may jump to 1.3250-1.3300.
According to the alternative scenario, the pound/dollar pair will hover within the levels of 1.3050/1.3100.

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