GBP/USD: Trading the British Manufacturing Jun 2013

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 8:30 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 looked  very sharp in the May release, jumping 1.1%. This  easily   beat the  forecast of 0.4%.  However, the markets are forecasting a much weaker  reading in June, with an estimate of a  flat 0.0%.  Will the indicator surprise the markets with another strong release?

Sentiments and levels

The pound enjoyed sharp gains against a broadly weak dollar last week, taking  advantage of some strong British PMIs and weak US employment numbers. However, this may prove to be a temporary move. The UK economy has not inspired confidence in the markets, and increasing talk of the US Federal Reserve winding up QE is bullish for the US dollar. Thus, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5804, 1.5648, 1.5550, 1.5484, 1.5416 and 1.5258.

5 Scenarios

1. Within expectations: -0.3% to 0.3%: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.4% to 0.7%: A strong reading can send the pair well above one resistance line.
3. Well above expectations: Above 0.7%: Such an outcome would likely prop up the pound, and a second resistance line might be broken as a result.
4. Below expectations: -0.7% to -0.4%: A weak reading could cause GBP/USD to lose one level of support.
5. Well below expectations: Below -0.7%: A release deep in  negative territory  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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