Monday, August 1, 2011

UK Manufacturing PMI (Purchasing Managers Index) 1 August 2011

Manufacturing PMI is a leading indicator that is usually released early in the month. Traders pay attention to this release for surprises as this survey may help to shape the general trend of the currency for the rest of the month. Here is the forecast:

4:30am (NY Time) UK Manufacturing PMI Release

Forecast 51.0 Previous 51.3
 
ACTION: GBP/USD BUY 53.0 SELL 49.0


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/USD if we get a 53.0 or better, or looking to SELL GBP/USD if we get a 49.0 or worse. We´ll use the Retracement Trading Method to trade this release. 

The Market

Recent data out of UK have been disappointing, to say the least… however, with the latest data for the Q2 GDP coming out as consensus expectation, market took that as a positive sign for the GBP due to a small group of pessimistic economists that predicted a negative reading…  Therefore, some repositioning took place after the release as the market turned a bit bullish for the Sterling.

However, with higher inflation, higher unemployment claims, low economic activities, and perhaps supply restrains from the earthquake in Japan, we may still see a rather depressed Manufacturing PMI today.

Additional Thoughts

Officially we are going to be trading a Retracement Trade, but if we get a deviation of 4.0 points, it justifies for a spike trade.

Pre-news Considerations
 
There should be no pre-news for this release.

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."

Thanks,