The HCOB Services PMI declined from 56.2 to 55.1, falling 0.8% below the forecast. This drop might indicate a potential halt to the rally of the EURJPY currency pair. However, despite inflation dropping faster than expected, the European Central Bank continues to consider rate hikes, emphasising the long-term upside potential for the currency pair. 

Meanwhile, Japan is experiencing inflation after a prolonged period of deflation. Despite this, the country’s interest rates remain below 0%. Although a boost in interest rates could benefit the Japanese Yen, the decision regarding the US debt ceiling could generate risk-off sentiments, potentially discouraging traders from seeking the safe-haven currency and further boosting sentiment for the Euro.  

Technical 

The EURJPY currency pair traded in an upward channel, but weak economic data for Europe saw a reversal, with 150.896 marking a possible pivot point (black dotted line). The current 150.024 (green line) resistance may be a point of interest for the bulls, where a move towards the 150.896 resistance may mark the continuation of this upward trend.  

However, the weak EU PMI release could potentially mark an opportunity for the bears to find resistance at 150.024 and edge the price level towards the 148.631 (red line) support.    

Summary 

The decline in the HCOB Services PMI may see the bears find resistance at 150.024 and edge the price level towards the 148.631 support. However, the bulls may fight back and push the price level towards the 150.896 resistance. 

Sources: TradingView, CNN, Reuters