GBP/USD Trading the UK Services PMI January 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  manufacturing conditions in the UK.  A reading which is higher than the market forecast is bullish for the pound.

Update:  UK Services PMI falls to 55.8 – new low for GBP/USD

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

Published on Tuesday 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.

Services PMI continues to show strong growth, with recent releases close to the 60-point level. The  November reading came in at 58.6 points, easily beating the estimate of 56.6 points. Another strong reading is expected, with the December estimate standing at 58.9 points. Will the index match or beat the prediction?

Sentiments and levels

With the pound taking a dive on Friday, we could be in for an upward  correction. At the same time, the dollar starts 2015 with strong momentum as its rivals are in retreat. Divergence will continue to weigh on the pound, as the Federal Reserve is  expected to raise rates while the BOE has backtracked somewhat from tightening.  Thus, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5539, 1.5416, 1.5290, 1.5114 and 1.5008.

5 Scenarios

1. Within expectations: 56.0 to 62.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:62.1 to 66.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 66.1: The chances of a sharp expansion are low. Such an outcome would prop up the GBP, and a second resistance line might be broken as a result.
4. Below expectations:  52.0 to 55.9: A weak reading  than forecast could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 51.9:  Such a scenario  would likely push the  pair downwards, possibly breaking a second support level.

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

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