GBP/USD: Trading the British Construction PMI January 2014

The British Construction PMI Index is based on a survey of Purchasing Managers in the construction industry. The survey includes about 170 respondents, who are surveyed for their view of a wide range of business conditions, including employment, new orders, prices and inventories. 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 Friday at 9:30 GMT.

Indicator Background

British Construction PMI  continues to  post impressive readings, and  climbed to 62.6 points in November, up from 59.4 points.  This beat the estimate of 59.3. The markets are expecting another strong reading for December, with an estimate of 62.3 points.

Sentiments and levels

The pound rally continues, as the currency  showed no signs of slowing down over the holidays. GBP/USD  has jumped over two cents since Christmas Day. If British numbers  continue to improve, the pound could post further gains. At the same time, the Fed finally announced a QE taper and with the markets  anticipating more  tapering in the near future, we could see the dollar move higher. Thus the overall sentiment  is neutral  on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6990, 1.6705, 1.66, 1.6475, 1.6343 and 1.6247.

5 Scenarios

1. Within expectations:  59.0 to 65.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations:  65.1 to 69.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 69.0: The likelihood of a sharp expansion is low. Such an outcome could prop up the GBP, and a second resistance line might be broken as a result.
4. Below expectations: 55.0 to 58.9: A  lower reading  than forecast could push the pair below one support level.
5. Well below expectations: Below 55.0: A poor release could push downwards on the pound, and GBP/USD could break a second support level.

For more about the GBP, see the GBP/USD forecast.

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