GBP/USD: Trading the British Manufacturing Jul 2014

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.

Update:  GBP/USD loses 1.71 as manufacturing production plunges

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.

The indicator rose 0.4% in the May release, matching the forecast.  Little change is expected in the upcoming release, with an estimate of 0.5%.

Sentiments and levels

The pound  continues to look sharp and has the 1.72 level  in its sights. Will the rally continue this week? US numbers have looked good since the awful GDP release, and the dollar could ride positive sentiment from an excellent NFP report, which has fueled speculation about a rate hike in the US. The situation in the UK numbers is similar, as positive data and recent remarks by the BOE have increased speculation about a rate increase. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7465, 1.7375, 1.7180, 1.6989, 1.6823, and 1.6686.

5 Scenarios

1. Within expectations: 0.3% to 0.7%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.7% to 1.0%: A strong reading could send the pair above one resistance line.
3. Well above expectations: Above 1.0%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome would  likely up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.1% to 0.2%: A reading in negative territory could cause the  pound to lose one level of support.
5. Well below expectations: Below -0.1%: A very poor reading could push the pair downwards, possibly breaking a second support level.

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