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

The UK economy will release its January services PMI later in the European session at 0930GMT, which is forecast to drop slightly from December’s 56.2 to 55.8 last month. 

A weaker PMI print is likely to exacerbate the BOE induced pain in GBP/USD, knocking-it off towards 1.2450 levels, while a positive surprise may rescue the GBP bulls, driving the rate back towards 1.26 barrier.

Analysts at TDS Bank noted, “Consensus is looking for the services PMI to slip from 56.2 to 55.8 in Jan. While we had initially seen a bit more upside risk and were looking for a small gain, the slightly softer tone in the manufacturing and construction PMIs earlier in the week leave us closer to consensus as we think that we could see a small decline instead.”

Deviation impact on GBP/USD     

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 10 and 50 pips in deviations up to 2.5 to -2, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

GBP/USD Technical Levels:

Haresh Menghani, Analyst at FXStreet notes, “A convincing break below 50-day SMA (1.2430 region) might negate any near-term bullish bias and turn the pair vulnerable to head towards testing 23.6% Fibonacci retracement level support near 1.2330-25 zone.”

“Any subsequent move above 1.2580 level, leading to a momentum above 1.2600 handle, is likely to be capped at 1.2650-55 strong resistance. However, a decisive break through 1.2650 hurdle would increase possibilities for continuation of the pair’s up-move, even beyond 1.2700 handle, towards its next resistance near 1.2730-35 area,” Haresh adds.