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UK manufacturing production preview: What to expect of GBP/USD?

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 10, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The GBP/USD is having a tough time staying on a front foot today after managing to score gains on Tuesday despite weak UK Q4 trade deficit numbers. The US stocks managed to regain poise and that seems to have buoyed the European equity index futures and Sterling. The investors now await the UK manufacturing production figure.

    Weaker manufacturing production already priced-in?

    The UK December manufacturing PMI showed the sector grew at its slowest pace for three months in December. New orders growth was the slowest pace in five months. The data released yesterday also showed the total trade deficit in Q4 was at the highest since start of 2015. The sequential drop in exports is likely to have weighed over the industrial production.

    The slowdown may have already been priced-in, given a more than 1000-pip fall seen in Dec-Jan. The worsening trade figures released yesterday also received little attention from the markets. Hence, the annualized contraction of 1.4% (expected) in manufacturing production may not do much damage to Sterling.

    Moreover, it would take a horribly weak numbers to trigger a fresh drop in Sterling. On the other hand, a better-than-expected number could help cable test 5-DMA 1.4513.

    GBP/USD Technical Levels

    The immediate resistance is seen at 1.4494 (hourly 100-MA), above which the spot could test supply in the key resistance range of 1.4513-1.4519 (5-DMA and 23.6% of 1.5930-1.4079 + 38.2% of 1.5230-1.4079). A break higher could open doors for 1.46 handle. On the other hand, a break below 1.4443 (hourly 200-MA) would expose 1.4374 (50% of 1.4079-1.4668), under which the spot could extend the drop to 1.4300 levels.
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