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

The UK economy will release its December services PMI later in the European session at 0930GMT, which is forecast to decelerate sharply from November’s 55.2 to 54.7 last month. 

A weaker PMI print is likely to put an end to the latest leg higher in the GBP/USD pair, sending it back below 1.23 handle, while a positive surprise may provide extra legs to the recovery, driving the rate through 1.24 barrier.

Analysts at Danske Bank noted, “We look for a fall from 55.2 to 54.2, which still indicates solid growth in the service sector. Overall, PMIs should continue to signal solid Q4 growth and that the economy is still quite resilient to Brexit uncertainty. That said, we expect GDP growth to slow but stay positive this year.”

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, “The pair’s recovery from 1.2200 important support continues to confront resistance near 1.2350 region. However, given its move above 1.2335-40 area, marking 23.6% Fibonacci retracement level of 1.2775-1.2200 downslide witnessed in December, the pair seems more likely to clear 1.2350 hurdle and head towards reclaiming 1.2400 handle before aiming to test an important confluence resistance near 1.2425-30 region, comprising of 38.2% Fibonacci retracement level and 50-day SMA.”

“Alternatively, failure to conquer 1.2350 resistance, and a subsequent weakness back below 1.2300 handle, would negate possibilities of any further recovery and drag the pair immediately towards 1.2270-65 support, en-route 1.2225-20 support zone.”