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EUR/GBP binary signal - UK Services PMI - 04 May 2017

Signal details
Entry Price: 
0.8450
Close Price: 
0.8497
Direction: 
High
Expiry Time: 
20:00 GMT
Result: 
ITM
How we trade
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IHS/Markit will be releasing the monthly services sector activity report, the purchase managers' index (PMI) today. Economists polled are forecasting a modest decline to 54.6 in the index for the month of April. This is down from March's reading of 55.0. The UK's services sector activity has been somewhat volatile with declines in the sector registered in January and February this year.

The services sector is one of the major contributors to the nation's GDP growth rate and therefore tends to have a bigger impact on the exchange rate. Earlier this week, data shows that the construction sector posted a modest gain as the index rose to 53.1 in April, up from 52.2 the month before and beat the forecasts. The manufacturing PMI was also stronger, rising to 57.0, up from 54.2 the month before.

The data suggested that the UK's economy was struggling to get back on track after a rather weak GDP growth in the three months ending March this year. The British pound was seen trading weaker despite upbeat data from the construction PMI yesterday. The pound was no match for the U.S. dollar which jumped on the back of a hawkish message from the Federal Reserve Bank.

For today's binary options signal, we expect EURGBP to break out from the range established over the past two days. Price action has been trading within this Tuesday's high and low ranges of 0.8484 and 0.8422 and has formed an inside bar. The break out from this range will establish short term direction in price. Therefore the near term outlook for EURGBP, hints to an upside breakout in price that could potentially target 0.8500 as a result.

Combining the fundamentals with the technical, it is clear that EURGBP could be in for an upside breakout in prices from the inside bar that was formed. Therefore, it is recommended to purchase daily CALL options at 0.8450 for a 20:00 GMT expiry time on bullish prospects in EURGBP.

Besides the data from the UK, the ECB President, Mario Draghi is expected to speak later in the day and could be seen as a key event risk for the common currency that could help keep the EURGBP biased to the upside.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.