GBP/USD: Trading the UK Construction PMI July 1 2013

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 Tuesday at 8:30 GMT.

Indicator Background

The Construction PMI produces is an important gauge of the health of the UK construction sector, and as a market-mover, can affect the direction of GBP/USD.

The  PMI looked sharp in the June reading, coming in at 50.8 points. This was the first time that it was above the 50-point level, which indicates expansion,  since  November 2012. The markets are expecting an even better reading this time around, with an estimate of 51.3 points. Will the indicator meet or beat this prediction?

Sentiments and levels

The pound’s woes continue, as the currency has shed over five cents since mid-June. Will the downward trend continue? UK releases have not impressed, and the government  has announced  deep spending cuts as it desperately tries to right an economy in deep trouble. Meanwhile, US releases looked solid last week, and the US dollar is looking firm against the other major currencies, as talk of tapering QE continues.Thus the overall sentiment continues to be bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5550, 1.5416, 1.5258, 1.5196, 1.5110 and 1.5000.

5 Scenarios

1. Within expectations:  48.0 to 55.0: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 55.1 to 59.0: An unexpected higher reading can send the pair well above one resistance line.
3. Well above expectations: Above 59.0. 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: 44.0 to 47.9: A sharper decrease than forecast could push the pair below one support level.
5. Well below expectations: Below 44.0: A reading well below the 50 point level would indicate significant contraction in the construction sector. This 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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