GBP/USD: Trading the British Manufacturing Oct 2013

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.

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

Published on Wednesday at 8:30 GMT.

Indicator Background

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 posted a weak rise of just 0.2% in August, shy of the estimate of 0.3%. The estimate for the September release is not much higher, at 0.3%.

Sentiments and levels

The pound enjoyed an excellent rally in September, but may have run out of steam. Last week’s PMIs disappointed, and the pound paid the price with some sharp losses. US data has been mixed, but the dollar still managed to post gains, even with the shutdown. If the pound falls below the 1.60 line, we  could see the downward trend continue. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6347, 1.6247, 1.6125, 1.6000, 1.5936 and 1.5832.

5 Scenarios

1. Within expectations: 0.1% to 0.5%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.6% to 0.9%: A strong reading can send the pair well above one resistance line.
3. Well above expectations: Above 0.9%: The likelihood of a sharp expansion in the manufacturing sector is low. Such an outcome would likely push up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.3% to 0.0%: A  weak  could cause the  pound to lose one level of support.
5. Well below expectations: Below -0.3%: 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.

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