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

UK services PMI for March is seen ticking higher to 53.5 from February figure of 52.7. The data comes after Friday’s weaker-than-expected manufacturing PMI release.

British Pound rallied on Monday to a high of 1.4322; almost trapping bears on the wrong side of the trade via Friday’s sharp fall. However, bulls were unable to capitalize, leading to a fall back to 1.4260 levels. The broad based JPY rally has dragged GBP/USD lower to 1.4220 levels ahead of the services PMI release.

Weaker-than-expected PMI to hurt Cable

Service sector is a major contributor, accounting almost 80% of the GDP in Q4. Plus, GBP/USD is already trading on a weak footing, courtesy of sharp sell-off in GBP/JPY. Hence, a weaker-than-expected services PMI report could open doors for a sharp drop in the GBP/USD towards 1.4165 (23.6% of 1.5230-1.3835).

Moreover, a weaker-than-expected drop would provide another reason for BOE to delay its rate hike. On the other hand, a better-than-expected PMI could help the pair re-test 50-DMA hurdle at 1.4278 levels.

GBP/USD Technical Levels

The immediate hurdle is noted at 1.4252 (hourly 50-MA + hourly 200-MA + 50% of 1.4668-1.3835), above which spot may re-test 50-DMA of 1.4278. A break higher would expose 1.43. On the other hand, a break below 1.42 would open doors for 1.4154 (38.2% of 1.4669-1.3835), under which pair may descend lower to 1.4079 (Jan 21 low).