GBP/USD: Trading the British Services PMI Nov. 2014

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 falls to 56.2 – GBP/USD pressured  

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.

The index continues to post figures  well above the 50 level, pointing to continuing expansion in the services sector. The  September release  came  dipped to 58.7 points, short of the estimate of 59.1 points. The markets are expecting more of the same in the upcoming release, with an estimate of 58.5 points.

Sentiments and levels

US GDP  looked sharp in Q3, pointing to strong economic growth.  With the Fed giving the economy a thumbs up and  winding up  QE, the next move is a rate hike in 2015. The UK economy is showing some signs of slowing down, and the BoE is not in any rush to raise interest rates. So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6250, 1.6131, 1.6006, 1.5909, 1.5746 and 1.5628.

5 Scenarios

1. Within expectations: 56.0 to 61.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 61.1 to 65.0: An unexpected higher reading can send the pair above one resistance line.
3. Well above expectations: Above 65.0: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations:  51.0 to 55.9: A sharper decrease than forecast could  push GBP/USD downwards  and break  one level of support.
5. Well below expectations: Below 51.0: A  poor reading would point to  weak expansion or even contraction in the services sector. This 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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