UK Manufacturing PMI has the potential of moving the market, especially considering recent unrest in UK as the market is definitely looking for a reason to trade. Considering how much GBP dropped due to the terrorists incident, I believe it is just a matter of time for the market to push Sterling back to where it was, as fundamentally nothing has changed.
If we get a strong surprise today, showing a resilient Manufacturing sector, I believe traders will renew their confidence and we should see demand on the back of the release… However, on a negative surprise, I wouldn’t discount GBP completely as the over-exaggerated sell-off is screaming for a retrace.
4:30am (NY Time) UK Manufacturing PMI Forecast 56.5 Previous 57.3
DEVIATION: 2.0 (BUY GBP 58.5 / SELL GBP 54.5)
The Trade Plan
We´re looking for a tradable deviation (or the difference between the forecast figure and the actual release figure) of 2.0. Since this is a leading indicator and its impact may hint the future trend of other economic indicators (such as inventory, employment, retail sales, etc..), the market usually reacts to this release with volatility if we get our deviation.
We´ll be looking to BUY GBP if we get a 58.5 or better, or looking to SELL GBP if we get a 54.5 or worse. We´ll use the Retracement Trading Method to trade this release. For more information, read: http://www.currencynewstrading.com/how-to-get-started-with-news-trading/
I’d recommend to use the Recommended Pairs from above as they are based on my CSM, which should provide the best combination of currency pairs to trade based on better/worse news… of course, you can also trade the default pair: GBP/USD.
Outlook Score Outlook score is derived from market sentiment, focus, and economic indicators for the currency. It represents the long-term trend of the currency and its market perception. In short, a strong Outlook Score means more long-term demand for the currency, and a weak Outlook Score is the opposite.
DEFINITION “UK Manufacturing PMI is a survey of purchasing managers in the manufacturing sector on various economic activities, including inventory, employment, orders, etc… A higher than 50 reading means expansion, or a less than 50 reading means contraction.”