GBP/USD: Trading the British Construction PMI

The British Construction PMI is based on a survey of Purchasing Managers in the construction industry. The survey includes about 170 respondents, who  are surveyed for their view of a wide range of business conditions, including employment, new orders, prices and inventories.    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 Wednesday at 8:30 GMT.

Indicator Background

The UK Construction PMI   has been over the 50 point  threshold  since early 2011  , indicating steady growth in the construction industry. The May reading was a solid 55.8, but the June estimate is lower, at 54.7. Will the index surprise the market and avoid a drop this month?

Sentiments and levels

The pound had a miserable May,  shedding a remarkable  9 cents against the US dollar. How much further can it drop? The deepening recession in Europe and crisis in Greece are sending nervous investors to safe haven currencies such as the dollar. Unless there is some unexpeected  weak data  out of the US, look for the greenback  to continue to make inroads against the British currency.  Thus the overall sentiment  continues to be bearish  on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5600, 1.5521, 1.5415, 1.5361, 1.5309 and 1.5229.

5 Scenarios

1. Within expectations: 52.5 to 56.5: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 56.6 to 60.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 60.0. The  likelihood of a sharp expansion  is low. Such an outcome could prop up the GBP, and a second resistance line might be broken as a result.
4. Below expectations: 50.0 to 52.4: A sharper decrease than forecast could  push the pair below  one support level.
5. Well below expectations:  Below 50.0: A reading  below the 50 point level  would indicate contraction in the construction sector for the first time in over a year.  This could push downwards on the pound,  and  GBP/USD  could  break a second support level.

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