GBP/USD: Trading the British Manufacturing Mar 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.

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

Published on Tuesday at 9:30 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  to 0.3% in the  January release,  which was short  of the estimate of 0.6%.  The estimate for the upcoming release remains at 0.3%.  Will the indicator meet or beat the prediction?

Sentiments and levels

The pound  continues to  trade at high levels, buoyed by  the British economy, which  continues to produce solid numbers. Speculation continues that we could see the BOE raise rates down the line, which is bullish for the pound. In the US, Nonfarm Payrolls  looked solid on Friday, and market sentiment remains positive about the US economy. Thus, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6990, 1.6823, 1.6705, 1.66, 1.6475 and 1.6343.

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 prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.3% to 0.0%: A reading at the zero level or in negative territory 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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