– 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
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
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
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Source: Daily fx