GBP/USD: Trading the British Manufacturing Aug 2013

The British Manufacturing Production, a key indicator, provides analysts and traders with a snapshot of the health of the UK manufacturing sector. A reading which is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday at 8:30 GMT.

Indicator Background

The British Manufacturing Production indicator measures the changes in output produced by manufacturers and in the turning of inventory. Manufacturing is a critical sector of the economy, and strong readings are an indication of economic growth.

Manufacturing Production has looked weak, posting two consecutive declines. In July , the indicator declined 0.8%, well short of the estimate of 0.3%. However, the markets are expecting a strong rebound ,with the upcoming estimate of 0.9%. Will the indicator meet or beat this rosy prediction?

Sentiments and levels

The pound had a rough week, and managed to avert sharp losses thanks to a superb Construction PMI release. The US economy is moving along nicely, although there are some hiccups along the way. This is in contrast to the UK economy, which continues to struggle. If we don’t see some excellent numbers this week, the pound could continue to lose ground. Thus, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5550, 1.5485, 1.5350, 1.5258, 1.5196 and 1.5110.

5 Scenarios

1. Within expectations: 0.5% to 1.3%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.4% to 1.8%: A strong reading could send the pair above one resistance line.
3. Well above expectations: Above 1.8%: The likelihood of such a sharp expansion is low. Such an outcome would prop up the GBP, and a second resistance line might be broken as a result.
4. Below expectations: 0.0% to 0.4%: A reading in negative territory could push GBP/USD below one level of support.
5. Well below expectations: Below 0.0%: A reading in negative territory would likely push the pair downwards, possibly breaking a second support level.

For more about the pound, see the GBP/USD.

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