The GBP/USD pair fell to a low of 1.4326 on Wednesday after the UK construction PMI came in lower than expected. The growth in the construction sector in the UK dropped to its weakest in nine months in January after a short-lived recovery in December. However, the cable recovered losses, but still ended moderately lower on the day around 1.4407 levels.
Eyes UK services PMI report
On Monday, the manufacturing PMI came out better than expected with 52.9 points. Yesterday, Construction PMI misses estimates with 55.0 points. Today, we have the most important release of all - the services PMI. The number could rock Pound and alter expectations surrounding tomorrow’s BOE event.
The Services PMI for January is seen at 55.3 compared to Dec’s 55.5.
A better-than-expected number could single handedly send Sterling higher to 1.45 levels. The trades would also be interested to see if the sector continued to add jobs at a healthy rate in January. However, the employment number may not have an immediate effect, especially if the headline figure prints higher than Dec’s reading.
Meanwhile, a weaker-than-expected number could send the pair down to its 5-DMA at 1.4335. However, further losses are unlikely, unless the PMI figure is way below estimates and closer to 50.00 levels. In case, the PMI prints around estimates, the Cable could continue its chart-driven move higher.
Technicals – Rising trend line intact in the hourly chart
Sterling’s recovery from the 5-DMA yesterday after a bullish daily closing above 1.4413 on Monday indicates the currency pair remains on track to test 1.4476 (resistance on the hourly chart).
A break above 1.4476 could see the pair test 1.4519 (38.2% of 1.5230-1.4079).
Watch out for the rising trend line support currently seen at 1.4373. An hourly close below the same could deliver a big blow to the bulls as it would open doors for a drop to next critical support seen at 1.4250-1.4160 (falling trend line support).
EUR/USD Analysis: Strong resistance at 1.0940
The risk-off in the financial markets pushed the EUR/USD pair to a high of 1.0940, before profit taking pushed the currency pair back to 1.0918 levels. The currency pair made another attempt at 1.0940 in Asia but again was met with offers. The services PMI figures are due for release across the Eurozone. But again, the numbers may not receive much attention as the funding currency EUR is more focused on the broader market sentiment.
Technicals – Falling trend line resistance intact
Multiple failures to take out 1.0940 (falling trend line resistance + 61.8% of Mar to Aug) could send the pair down to 1.0890 (38.2% of 1.1495-1.0517).
A break below 1.0890 could send the pair lower to 1.0878 (10-DMA).
An intraday break above 1.0940 could result in a rally towards 1.10, but should be viewed with caution.
Moreover, only a daily close above 1.0940 would indicate a convincing bullish break
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