UK Construction Report Might Change The Trend For GBP/USD

Posted Wednesday, May 3, 2017 by
Skerdian Meta • 1 min read

Yesterday the UK manufacturing report was released and it appears positive on all fronts. It included better headline numbers as well as better figures for new orders.

It pushed GBP/USD 40 pips higher at first which extended to 80 pips later in the evening. It was a good piece of data and it put the trend back on track.

But the numbers were too good to be true and we didn´t even peak above 1.30. That tells you one thing, the uptrend is running out of steam.

Today we will get the very important construction report. It accounts for a large part of the service sector and the service sector accounts for about 75% of the UK GDP. Prepare for some action if we see substantial deviation.

If the numbers come around 55 PMI points, which is 3 points above consensus, then we expect GBP/USD to breach 1.30 but I don’t see the price staying above much longer. We recommend selling this forex pair if we dive below 1.30 shortly after the break, supposing this scenario takes place.  

If the numbers come below 51 PMI points, the sector will be close to contraction. This would bring the services sector down as well, pressing the Brexit button again, and sending GBP/USD diving back down for some time.

So, we recommend selling whenever you can get in the market after the release, but you will have to manage stop loss manually and keep a close eye on it in case there are whipsaws.   

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