GBP/USD: Trading UK Claimant Count Change November 2012

The UK Claimant Count Change measures the change in the number of people claiming unemployment benefits. Along with the Unemployment Rate, which is released at the same time, it provides a snapshot of the UK employment sector. A reading which is  better than the estimate is bullish for the pound.

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

Published on Wednesday at 9:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of GBP/USD.

The indicator has dropped for three consecutive readings, indicating improvement in the UK employment sector. The estimate for  November  calls for a very modest decline of 0.5 thousand.

Sentiment and Levels

The pound has  lost over  four cents since mid-September. Will the downward spiral continue? UK data has been rather ordinary, and the BOE maintained the QE and interest rate levels last week. Meanwhile, US data, such as employment numbers and consumer confidence, continue to improve. If the US economy gains more traction, we could see the greenback make more inroads against the pound. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels from top to bottom: 1.6060, 1.5992, 1.5930, 1.5881, 1.5750 and 1.5648.

5 Scenarios

1. Within expectations: -4.0K to 4.0K: In this scenario, GBP/USD could show some slight movement, but it is likely to remain within range, not breaking any levels.
2. Above expectations: -8.0K to -4.1K: A strong reading would indicate unemployment is dropping, and could send the pair above one resistance level.
3. Well above expectations: Below -8.0K: Another sharp drop in employment figures could bolster the pound, and two levels of resistance could be broken.
4. Below expectations: 4.1K to 8.0K: A weak reading could push the GBP/USD downward, with one  support level at risk.
5. Well below expectations: Above 8.0K: A significant loss of jobs  could shake confidence in the UK economy, and GBP/USD could break two support levels.

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