The British services sector expanded more than expected in February, underscoring the still uneven pace of global recovery. This, in turn, is affecting the demand for lower-risk securities. To learn how, have a look at our latest analysis of gold.
According to Markit, UK's services PMI jumped in February, easily beating the market forecasts. Earlier today, the German services PMI was also shown to have expanded more than expected in February. This welcoming development reinvigorated the pound and prompted a decisive breakout above a major consolidation range.
The range itself spanned between the 38.2 per cent Fibonacci retracement level at 1.35077 and 61.8 per cent Fibonacci at 1.35999, as shown on the 4H chart above. Notice that each of the two extremes was tested on two separate occasions, confirming the completion of the preceding downtrend.
Meanwhile, the breakout itself developed in a predictable manner. This is predicated on the fact that the misleading throwback that followed the breakout itself did not reach the lower limit of the range. Instead, the price action promptly returned above the upper extreme of the range.
The price action may now attempt to test the previous swing peak at 1.37500, though an intermittent pullback to the resistance-turned-support at 1.35999 is also possible.
According to the findings of the report, UK's services PMI grew by 60.8 index points, above market forecasts of 55.6 and the 54.1 index points that were recorded a month prior.