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GBPUSD Monthly High in View Amid Rebound in U.K. Production

GBPUSD Monthly High in View Amid Rebound in U.K. Production

2013-10-09 04:00:00
David Song, Strategist
Share:

- U.K. Industrial Production to Rebound in August

- GBPUSD Holds Key Support; Bullish Trend in Focus

Trading the News: U.K. Industrial Production

The British Pound may make a more meaningful run at the 1.6300 handle as U.K. Industrial Production is expected to increase 0.4% in August.

What’s Expected:

Time of release: 10/09/2013 8:30 GMT, 4:30 EDT

Primary Pair Impact: GBPUSD

Expected: 0.4%

Previous: 0.2%

DailyFX Forecast: 0.4% to 0.6%

Why Is This Event Important:

The rebound in business outputs may encourage the Bank of England (BoE) to adopt an improved outlook for the U.K. economy, which could heighten bets of seeing the central bank implement its exit strategy ahead of schedule.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Net Consumer Credit (AUG)

0.6B

0.6B

Producer Price Index- Output n.s.a. (YoY) (AUG)

1.8%

1.6%

Purchasing Manager Index- Manufacturing (AUG)

55.0

57.2

The U.K. may see a more meaningful pickup in business outputs on the back of easing input costs, and the shift in the policy outlook may keep the British Pound afloat as the central bank slowly moves away from its easing cycle.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Retail Sales inc. Auto (MoM) (AUG)

0.4%

-0.9%

Total Business Investments (QoQ) (2Q F)

0.9%

-2.7%

Trade Balance (JUL)

-1.700B

-3.085B

However, the recent slowdown in private sector consumption may limit production over the near-term, and a dismal development may bring a more meaningful correction in the GBPUSD as market participants weigh the outlook for monetary policy.

How To Trade This Event Risk(Video)

Bullish GBP Trade: Industrial Output to Rebound

  • Need green, five-minute candle following the print to consider a long British Pound trade
  • If market reaction favors a long trade, buy GBPUSD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish GBP Trade: Data Dampens Outlook for Stronger U.K. Recovery

  • Need red, five-minute candle to favor a short GBPUSD trade
  • Implement same setup as the bullish British Pound trade, just in opposite direction

Potential Price Targets For The Release

GBPUSD Daily

Forex_GBPUSD_Monthly_High_in_View_Amid_Rebound_in_U.K._Production_body_Picture_2.png, GBPUSD Monthly High in View Amid Rebound in U.K. Production

Chart - Created Using FXCM Marketscope 2.0

  • Upward Trending Channel Remains Intact; Multi-Year Wedge/Triangle at Risk
  • Relative Strength Index Carving Higher Low?
  • Interim Resistance: 1.6300 Pivot (2012 highs)
  • Interim Support: 1.6000 Pivot

Impact that the U.K. Industrial Production report has had on GBP during the last month

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL 2013

09/06/2013 8:30 GMT

0.2%

0.0%

-9

+29

July 2013 U.K. Industrial Production

Forex_GBPUSD_Monthly_High_in_View_Amid_Rebound_in_U.K._Production_body_ScreenShot196.png, GBPUSD Monthly High in View Amid Rebound in U.K. Production

Industrial outputs in the U.K. held flat in July after advancing a revised 1.3% the month prior, while manufacturing advanced another 0.2% during the same period. The weaker-than-expected print dragged on the British Pound, with the GBPUSD slipping below the 1.5570 region, but the sterling regained its footing during the day to close at 1.5623.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com

Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, please follow this link

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