GBP/USD: Trading the British Manufacturing Mar 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 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.

After a string of weak releases,  Manufacturing Production shot up 1.6% in February, well above the market estimate of 0.7%.  However, the markets are  bracing for  a much weaker figure for March,  with an estimate of a paltry gain of just  0.1%. Will the indicator surprise the market with another strong reading?

Sentiments and levels

The pound’s misery continues as the British currency has shed over ten cents since the beginning of February. The UK economy continues to sputter, in contrast to the US, which has posted some solid numbers of late. This has resulted in the dollar putting more pressure on the pound.   The pound has again dipped below the 1.50 line, and we could see the pair continue to trade in 1.49 territory.Thus, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5189, 1.5061, 1.5010, 1.4896, 1.4765 and 1.4665.

5 Scenarios

1. Within expectations: -0.2% to 0.4%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.5% to 0.8%: A strong reading can send the pair well above one resistance line.
3. Well above expectations: Above 0.8%: Such an outcome would prop up the GBP, and a second resistance line might be broken as a result.
4. Below expectations: -0.6% to -0.3%: A reading in negative territory could likely cause the GBP to lose one level of support.
5. Well below expectations: Below -0.6%: 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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