GDP/USD: Trading the British Claimant Count Change May 2012

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  market in the UK.  A reading which is higher than the market forecast is bearish for  the pound.    

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

Published on Wednesday at 8:30 GMT.

Indicator Background

Analysts  carefully scrutinize  the UK Claimant Count Change, as it is a key economic indicator. Job creation  is a crucial engine for economic growth, and  unexpected employment data  can affect the direction of GBP/USD.

The indicator looked sharp in April,  falling substantially  to 3.6K.  This was well below the market estimate, which stood at 6.6K. The markets are predicting a weaker reading in May, calling for an increase  of 4.9K.

Sentiment and Levels

After a stellar performance  in 2012, the pound has lost some of its shine in recent weeks. Stronger US data, coupled with the turmoil in Europe is sending investors to safe haven currencies such as the dollar, and the pound is paying the price. With the important 1.60 level in sight, the pound may continue to lose ground to the dollar. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels from top to bottom: 1.6356, 1.6265, 1.6142, 1.60, 1.5930    and 1.5805.

5 Scenarios

1. Within expectations: 2.0K to 8.0K: 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:  -1.0K to 1.9K: A reading close to or below the zero level is not likely. In this scenario, the British economy, the pair could push above  one resistance level.
3. Well above expectations: Below -1.0K.   Unemployment claims  have not dropped since March 2011.  If  such a scenario does occur, look for the pound to respond positively,    and GBP/USD could break two or more resistance lines.
4. Below expectations: 8.1K to 11K: A  weaker reading  than expected could push GBP/USD downward, with one level at risk.
5. Well below expectations: Above 11.1K: A  sharp increase in  unemployment claims  will shake confidence in both the economy and the pound, and GBP/USD could break two or more support levels.

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