Is UK Manufacturing The Turning Point For GBP?
Skerdian Meta • 2 min read
The GBP has been holding on pretty well over the last couple of months. If you look at the GBP/USD chart of the last several months, you´d never think that Brexit is approaching and the UK economy is weakening.
The UK economic data has been really disappointing over the last couple of months, and the GBP/USD chart is hardly doing it justice. However, that is due to the USD side as we have often mentioned recently. Yesterday was the last straw; GBP/USD took off together with EUR/USD as cash flows distorted the forex market, as we explained in the US session brief yesterday.
That is continuing this morning as well, with GBP/USD breaking above the 1.32 level.
Speaking of cash flows, there are huge cash flows usually taking place at the end of every month, but that same principle applies to the first day of the next month. Today is the 1st of August, so again, mind the cash flows.
The UK manufacturing numbers, which is one of the main 3-4 data releases, will be released shortly and it comes after a streak of disappointing releases last month. It will be very interesting to see if the curse is broken for the UK economy or whether the disappointing number will continue here.
As we have seen in the last month or so, the GBP/USD took a 100-200 pip hit after the disappointing numbers were released, only to reverse and extend the uptrend.
Trade idea: If the numbers are disappointing again, which is very likely, then we´ll probably see GB/USD take a dive. If I´m fast enough i will try to open a sell forex signal targeting 1.31.
If this scenario unfolds and we get down there, then I would look to reverse the trade around 1.31 or maybe 1.30 depending on the pace of the decline and target the top again at 1.32 with a stop below 1.30. That´s how we have seen this forex pair react every time during such occasion last month, so let´s play it this way.