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UK services PMI preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 3, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    The GBP/USD pair is trading at the six-day high of 1.4090 levels ahead of the data release in the UK, which could show the services activity growth slowed slightly in February.

    Weak PMI to weigh over Pound

    Service sector is the major contributor to UK economy; hence the data receives more attention as compared to manufacturing PMI and construction PMI report. The index is seen dropping slightly to 55.1 from January’s 55.6.

    A weaker-than-expected figure amid ongoing Brexit saga would give a strong reason for BOE to tilt towards interest rate cut. On the other hand, a positive surprise could help Sterling extend the ongoing corrective rally.

    Apart from the headline figure, investors would also look into the details for more information regarding the employment levels in the sector. The January report had shown the new business rose at the sharpest rate since last July. Investors would like to see if the growth of new business continued in February.

    However, the headline figure is likely to have a more say in determining the exchange rate.

    GBP/USD Technical Levels

    The immediate hurdle is seen at 1.4125 (Jan 20 low), above which the spot could target major resistance zone of 1.4154-1.4165(38.2% of 1.4669-1.3835 and 23.6% retracement of 1.5230-1.3835). The inverse head and shoulder breakout seen on the hourly chart also presents a scope for a rally to 1.4165. Hence, if the pair manages to chew through offers around 1.4165, doors would be opened for a rally to 1.4252 (50% of 1.4669-1.3835).

    On the lower side, support at 1.4079 (Jan 21 low) could come into play, which if taken out could see the spot test confluence of support at 1.4032 (23.6% of 1.4669-1.3835 + 10-DMA). This support could be breached if the PMI prints horribly weak, thus opening doors for a slide to 1.4 (inverse head and shoulder neckline).
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