GBP/USD: Trading the UK Claimant Count Change Dec 2012

The UK Claimant Count Change measures the change in the number of people claiming unemployment benefits. Along with the Unemployment Rate, which is released at the same time,  the indicator  helps provide a snapshot  of the employment situation in the UK. A reading which is better than the estimate is bullish for the pound.

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

Published on Wednesday at 9:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. Thus, the publication of UK employment data is highly anticipated by the markets, and an unexpected reading could affect the direction of GBP/USD.

Claimant Count Change looked very weak in November, as there were 10.1 thousand newly unemployed persons.  This reading was much worse than the estimate, which stood at -0.5K.  The forecast for this month stands at 5.1K. Will the indicator rebound and beat the estimate?

Sentiment and Levels

The pound didn’t break out last week, but it has looked solid since mid-November, gaining close to two cents against the greenback. As we approach the end of the year, the markets are now focused on the looming fiscal cliff crisis. It is likely that some kind of compromise will be reached in Washington. If the fiscal cliff is averted, market sentiment would be positive, and this could bolster the pound at the expense of the greenback. So, the overall sentiment is bullish on GBP/USD towards this release.

Technical levels from top to bottom: 1.6343, 1.6247, 1.6122, 1.6060, 1.5992  and  1.5930.

5 Scenarios

1. Within expectations: 1.0K to 9.0K: In this scenario, GBP/USD could show some slight movement, but it is likely to remain within range, not breaking any levels.
2. Above expectations: -7.0K to -3.0K: A strong reading would indicate unemployment is dropping, and could send the pair above one resistance level.
3. Well above expectations: Below -7.0K: A sharp drop in unemployment  claims could bolster the pound, and two levels of resistance could be broken.
4. Below expectations: 9.1K to 13.0K: A weak reading could push the GBP/USD downward, with one support level at risk.
5. Well below expectations: Above 13.0K: A significant  rise in unemployment claims  could shake confidence in the UK economy, and GBP/USD could break two support levels.

For more on the pound, see the GBP/USD forecast.

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