GBP/USD - Put bias strengthens, eyes UK Services PMI

• GBP/USD Risk reversals hit 3.5 week low.
• Focus on UK services PMI.

GBP/USD one-month 25-delta risk reversals gauge fell to lowest since Jan. 11, indicating rising demand for GBP puts.

The risk reversals were paid at 0.325 GBP puts compared to 0.225 GBP puts on Thursday and 0.325 GBP puts on Jan. 18. The slide adds credence to Friday's 70-pip slide from 1.4278.

Focus on UK services PMI

The UK services PMI due today at 09:30 GMT is expected to show the pace of expansion in the UK service sector remained largely unchanged at 54.2 index points in January.

Analysts at Nomura write, "The services PMI was below that of manufacturing for almost all of 2017 as a weaker sterling and stronger global growth have benefited manufacturing more. We expect a similar reading on the services PMI in January as December (around 54)."

The January manufacturing PMI unexpectedly eased in January, coming in at 55.3 for January, its weakest reading since June 2017. So as per Nomura's analysis, the services PMI will likely print below 55.3.

A better-than-expected services PMI could push GBP/USD above Friday's high of 1.4278. On the other hand, a weaker-than-expected PMI could yield 1.3980 (Jan. 30 low).

GBP/USD Technical Levels

The spot hit a low of 1.4082 in Asia before rising to 1.4120. A move above 1.4144 (10-day MA) would expose 1.4278 (Fri's high). The next major hurdle stands at 1.4345 (Jan. 25 high). On the downside, breach of support at 1.4082 (Asian session low) could yield a sell-off to 1.40 (psychological support) and 1.3980 (Jan. 30 low).