This Wednesday morning at 9:28am GMT (4:28am EST) the Manufacturing PMI figures for the UK were released. This economic figure is based on a survey of the purchasing managers in the manfacturing industry and it is seen as a good leading indicator of the economy as if these companies are purchasing more inventory then the assumption is that they will be creating more goods as they are expecting consumers to send more. This data followed a manufacturing pmi data from a many other nations including German, Italy, Spain & Sweden which were lower than expected and France,Ireland, Norway, Hungary, Czech & Turkey which was higher. The big news which was aiding Risk Appetite and causing the markets to reverse some of the steep losses seen at the beginning of the week was the Chinese Manfacturing PMI which was released last night-30 minutes after the Australian GDP figures. This was a 7 month high for the Chinese data and indices rallied thru the asian session and even the EURUSD lifted....news as the European session got started was that the European Peripheral Bond spreads were tightening, providing some relief to the crisis for now. Any here is the UK Data:
(UK) NOV PMI MANUFACTURING: 58.0 V 54.7E (highest level since Sept 1994)
- Employment Index: 57.6 v 55.4 prior (record)
- Prior revised higher from 54.9 to 55.4
This is a stellar deviation and the best of all the countries Manufacturing PMI figures. In fact as the data shows it was the highest reading since 1994. So automatically the Super Sonic Fast Economic News Weapon triggered a trade entry into the GBPUSD. Pre-release price was about 1.5585 and priced shot up quickly to 1.5612 for instant +25 pips or so. This deviation was massive and looking at the history of price action on the British Pound after the release of this number it was quite obvious there would be more gains to come. About 20 seconds after the data hit the wires as the swing traders and technically oriented participants scrambled to eject out of their positions, the GBPUSD briefly dipped down briefly to 1.5603 on the ask. This was a fantastic opportunity to enter a forex news afterspike trade, and we did live in the online forex signal traderoom. Price continued to move up and hit 1.5620 soon later. Price action did get a bit choppy with 10 pips up then 10 down, but there definately upward pressure on the pair. Going back to the price action history of the last big deviation which was in September with a -2.7 deviation - after the initial spike down, price grinded down over the next 15 minutes with little retracement, but much slower than you might expect after such a deviation. Therefore it seemed very likely this would continue, some patience was needed. Price soon hit 1.5630 which is the 161% fibonacci projection of the initial news spike move
The highs for the week on the GBPUSD were just around 1.5650 and it was highly likely that stops were lurking there for those who had positioned themselves short for the week, see the hourly chart. Those trading off daily and weekly charts and not keeping up to date with news sentiment flow thru the progression thru the trading venues on the world's main Asian, European and American continents. As previously mentioned, the market wants to do business and will go for those stops, but it did take awhile thou as the 2nd chart shows - some 45 minutes after the release the 38% fibonacci of the move up provided the launching platform to take out those 1.5650 stops. Price kissed this level and did not look back. A nice obvious target there for more of a post news sentiment flow swing trade. For the more aggressive a short once the stops had been taken would have worked too. Once price moved back off this level some, partial profit could be taken and the stop moved to breakeven. Eventually the British Pound did fall back 60 pips off this level if the trader was patient enough to let it make its move, usually this types of trades are great scalps but occasionally they can run and make a decent amount of pips.
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