GDP/USD: Trading the British Claimant Count Change September 2012

The UK Claimant Count Change measures the change in the number of people claiming unemployment benefits. Along with the Unemployment Rate indicator, which is released at the same time, it provides a snapshot of the UK employment situation and  could affect the direction of  GDP/USD.    

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

Published on Wednesday at 8:30 GMT.

Indicator Background

Analysts view the data measured by the UK Claimant Count Change as extremely important, as the economy cannot grow without job creation. An indicator reading which is lower than the market forecast is bullish for the pound.

The  August release looked  very sharp,  with 5.7 thousand less unemployed people.  The news was especially positive as the markets had forecast as increase of 6.2K additional unemployed persons. However, the market estimate for September stands at a very modest gain of 0.1K. Will the indicator again surprise the markets with a strong reading?

Sentiment and Levels

Stronger UK releases and poor employment data out of the US was the ideal recipe for the pound’s rally last week. The pound has continued to make inroads against the dollar, and has crossed above the important 1.60 line. Speculation over QE is increasing as the US economy continues to under-perform, and this could help the pound extend its gains against the greenback. We could see  Bernanke take action  as early as this week as  the FOMC meets. So, the overall sentiment is bullish on GBP/USD towards this release.

Technical levels from top to bottom: 1.6247, 1.6122, 1.6060, 1.5992, 1.5930, and 1.5805.

5 Scenarios

1. Within expectations: -4.0K to 4.0K: 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: -8.0K to -4.1K: A strong reading would be a welcome positive sign of the health in the British economy, and could send the pair above one  resistance level.
3. Well above expectations: Below -8.0K: Another   sharp drop in employment figures could bolster the pound, and two levels of    resistance could be broken.
4. Below expectations: 4.1K to 8.0K: A  weak reading  could push the GBP/USD downward, with one  support  level at risk.
5. Well below expectations: Above 8.0K: A   significant loss of jobs will shake confidence in both the UK economy and the  pound, and GBP/USD could break two support levels.

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