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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 Wednesday 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  sagged in September, declining 1.2%. This was well below the estimate of 0.3%.  The markets are expecting a strong turnaround for October, with an estimate of a 1.2% gain. Will the indicator meet or beat this rosy prediction?

Sentiments and levels

The pound looked awful last week, shedding about 250 points against the surging US dollar. However, the pound has stabilized this week and is back above the key 1.60 line. Over in the US, we’re unlikely to see QE tapering before 2014, so the QE uncertainty, which had been weighing on the dollar, has receded for the time being. Thus, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6343, 1.6247, 1.6125, 1.6000, 1.5893 and 1.5752.

5 Scenarios

  1. Within expectations: 1.0% to 1.4%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 1.5% to 1.9%: A strong reading can send the pair well above one resistance line.
  3. Well above expectations: Above 1.9%:  A sharp expansion in the indicator would likely prop up the GBP, and a second resistance line might be broken as a result.
  4. Below expectations: 0.5% to 0.9%: A weak reading could  push the pound below  one level of support.
  5. Well below expectations: Below 0.5%: A very poor release 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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