Pound powers higher as UK Services PMI data smacks expectations

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One would have expected the pound to euro exchange rate to remain rangebound ahead of the 9:30 release of UK Service Sector PMI; however the EUR is being sold on news that Eurozone PMI Services increased to 47.2 points in May, from 47 points in April, according to data released today by Markit.

The problem for the euro though is that consensus forecasts were for growth to come in at 47.5.

Composite PMI ticked up to 47.7 from 46.9, as forecasted.

Ahead of the UK Services PMI note that analysts are expecting a reading of 53 - a big ask in our opinion.

Technical considerations continue to be of utmost importance

Despite this being a heavy week for data flow one gets the sense that at the end of it all the releases cancel themselves out.

In essence, forex traders are left looking at the technical charts for guidance.

Piet Lammens at KBC Markets says:

"On Tuesday, sterling failed to extend its gains eked out after a better than expected UK manufacturing PMI, released on Monday. Technical considerations prevailed. EUR/GBP joined the broader rebound of the EUR/USD headline pair and touched an intraday top in at 0.8558. The UK construction PMI also jumped over the 50 mark, but it hardly impacted sterling trading."

Lammens notes that later in the session, the decline of EUR/USD dragged EUR/GBP lower too. The pair closed the session virtually unchanged at 0.85427, compared to 0.8534 on Monday evening.

So what does the outlook for today hold from a technical perspective?

Trading Central say they remain bullish on the euro:

"Our preference: Long positions above 0.853 with targets @ 0.856 & 0.858 in extension.

Alternative scenario: Below 0.853 look for further downside with 0.8515 & 0.85 as targets.

"The pair is rebounding on its support and should post further advance as the RSI is reversing up."