GBP/USD: Trading the British Services PMI Nov. 2015

The British  Services PMI (Purchasing Managers’ Index) is  based on a survey of purchasing managers in  the  services sector. Respondents are surveyed for their view of the economy and business conditions in the UK.  A reading which is higher than the market forecast is bullish for the pound.

Update:  UK Services PMI rises to 54.9 – GBP/USD rises

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Wednesday at 9:30 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of future economic trends.

The index has been losing ground in recent readings, and slipped to 53.3 points in September, its lowest level since April 2013. This figure was well off the estimate of 56.4 points. The markets are expecting better news in October, with an estimate of 54.6 points.

Sentiments and levels

With  the  dramatic Fed statement, a rate hike in 2015  is once again a reasonable possibility, which is good news for the US dollar, as the greenback may look more attractive to investors  and could make  broad gains. At the same time, the pound has also shown strength, as the UK economy is in fairly good shape, especially compared to the Eurozone next door.  So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5682, 1.5590, 1.5485, 1.5341, 1.5269 and 1.5163.

5 Scenarios

1. Within expectations: 51.0 to 58.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 58.1 to 62.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 62.0: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  54.0 to 57.9: A sharper decrease than forecast could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 54.0: A  poor reading would likely push the  pair downwards, possibly breaking a second support level.

For more about the pound, see the GBP/USD forecast.