GBP/USD: Trading the British Jobs Dec 2011

The UK Claimant Count Change measures the change in the number of people claiming unemployment benefits. Along with the unemployment rate indicator, which is released at the same time, it provides a snapshot of the employment situation in the UK. Traders should pay close attention to this release, as it is  a market-mover for GDP/USD.

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

Published on Wednesday at 9:30 GMT.

Indicator Background

Analysts view the data measured by the UK Claimant Count Change as extremely important, as the economy cannot grow without job creation. An indicator reading which is lower than the market forecast is bullish for the pound.

After a reading in October of 17.5K,  the indicator  dropped  all the way down to  5.3K in November, its best showing since April, and fourth  consecutive drop.  The  November forecast  was well off, at 20.4K. This month’s forecast is up to 17.3K. Will the indicator again prove the markets wrong?

Sentiment and Levels

The British pound  continues to be affected  by the eurozone debt crisis, and economic indicators, particularly in the manufacturing and retail sectors, are  very  weak.   So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels from top to bottom: 1.5882, 1.5815, 1.5780, 1.5690,   1,56, 1.5576, 1.5520, 1.5470 and 1.5423.

5 Scenarios

1. Within expectations: 17K to 25K: 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: 12K to 16.9K: An unemployment  reading  better than expected would be a welcome positive signal of economic growth, and could send the pair above one resistance level.
3. Well above expectations: Below 12K: A sharp drop in unemployment figures could trigger a rally, and two levels of resistance can be broken.
4. Below expectations: 25.1K to 30K: A reading higher than expected could push the GBP/USD downward, with one level at risk.
5. Well below expectations: Above 30K: A severe loss of jobs will shake confidence in both the economy and the pound, and GBP/USD could break two support levels.

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