UK Service PMI - Rumors of Lower Figure prove true, still rebound

This morning on March 5th 2012 at 9:28 GMT (4:28 EST) the PMI figures for UK Services was released. This is the largest sector of the UK economy and as a forward indicator it is an important number to determine GDP for Q1 2012. Recently the Retail Sales numbers have been better and last month this data surprised the market and came out much higher at 56.0 above the 53.3 expected. Expectations were set at 55.0 this month which were perhaps getting ahead of things as we keep being told this recovery will be slow and choppy.

The markets were risk off since the Sunday open. This was mainly due to Chinese Premier Wen saying that growth in China would be less than previously estimated, also an article by the German newspaper the Spiegel saying that Private Sector Involvement (PSI) in the Greek Bond Swap deal would be less that estimated meaning that a CDS might be triggered. This combined with weaker readings for PMI Services from most EuroZone countries other than Germany, kept things risk-off.

About 10-15 minutes before the release there was 'market talk' that the print would be lower than expected and this turned out to be true, however the GBPUSD was already at the lows of the day. This news was very good to trade but recently it has been about the pre-news move, a small spike on the release and then a reversal...Last months quite large deviation was different that this new norm. Today's lower deviation was not as big as last month's positive one, and in the broader context the number is still quite good compared to many other countries. The GBPUSD reversed off its lows.

Here are the figures:

UK PMI Services
Estimates- Median: 55.0 Average: 54.8 Low Estimate: 53.0 High Estimate: 57.0
Actual: 53.8 Prior: 56.00 No Revisions

Here is the 30 second chart of GBPUSD forex pair which shows how despite the weak release the pair reversed higher:

Here is a 5 minute chart of the GBPUSD forex pair which shows the move in price leading into the release. Sometimes many market participants are just waiting for the news to pass before taking trades.

This 1 minute chart of the GBJPY chart shows the pair doing very little, a slight up bias perhaps. The Yen crosses have been reversing major downtrends recently but have given back some of those strong upmoves since the week opened for trading.

On this 1 minute chart of GBPCHF we can see that the British Pound did weaken further. Sometimes using these cross pairs can counteract the general market influences of Risk On/Off=US Dollar Weak/Strong dynamic which affects the majors.

Likewise against the Euro the Pound did eventually weaken some more by moving up in euro strength/pound weakness.

This 1 minute chart of GBPAUD shows how tricky it can be trying to choose the correct cross. Everyone loves the Australian Dollar because it has a great yield-High interest rate, but in a general risk-off environment which is not specifically focused on the EuroZone Debt Crisis, but more because of a China Slowdown or last week's Beranke Comments, the Australian Dollar can actually get hit harder than the Eurusd. Still after a few minutes the GBPAUD did dip some more on Aussie strength/pound weakness.

Just to make the point, here on the 1 minute chart of the GBPCAD we see the Pound would just not weaken against the Canadian Dollar despite the bad news.

Finally a 1 minute chart of the FTSE Future Contract to show how it also moved off its lows after the news.

UK Services PMI - Good Deviation higher but delayed spike

This Friday morning of February 3rd 2012 at 9:28 GMT (4:28 EST) the Services PMI figures were released out of the UK. This figure is a forward looking indicator for the UK economy because it measures the Purchasing Manager Index, and if the companies are buying more that usually means that they expect to sell more to the customers. Anyway these figures were quite bad in Q4 2011 getting quite close to the 50 level. The 50 level is key because below it signifies contraction and anything above it is considered growth. The PMI is for the Services sector which is the largest sector in the UK and so is quite important. There were prints below 50 in PMI for manufacturing last year but Services just managed to avoid it.

Last year this was probably the best economic news indicator to trade. It is quite simple for news trading as there is only 1 number and its revision, unlike other news which comes with Core and Headline, Month-on-Month, Year-on-year and so on. However in the past 3-4 releases there has been a move heading into the release, then despite what in the past have been good sized deviations capable of moving the British Pound pairs alot of pips has just seen a small 10-15 spike extension of the pre-news move, followed by a complete reversal below the pre-release price. This is dangerous as it can trap any traders who may have had some slippage or experience delay in getting their orders filled by their brokers. The pre-news move is often difficult to distinguish because it occurs in tandem with moves in other key major pairs such as the EURUSD, so whether it is a rumor or leak of a bullish UK data release or just general risk appetite or aversion is not distinguisable. Just when it nearly became reliable enough to fade the spike reversal on this number, today there was a tiny whipsaw but a few minute later the GBPUSD pair did rally. It is important to remember that although the news comes out at 28 minutes past the hour, some do not see the data until half past. This actually is when the pair did start to rally. It was a good sized positive deviation so it did do what it was suppose to do even with the move up heading into the release.

Here the figures:
UK PMI Services
Estimates- Average: 53.3 Average: 53.3 Range: 52.0 to 55.0
Actual: 56.0 Prior: 54.0 No Revision

First the 30 second chart of the GBPUSD pair, the release is marked with the red arrow:

next is the 5 minute chart which shows the run up in the GBPUSD heading into the news. The pair had another move higher and then started to top out. There was the US Non-Farm Payrole later in the day, so it was unlikely for the markets to move alot one way or the other before this:

Also here is the 30 second chart of the GBPJPY, it also moved up after 2 minutes like the GBPUSD:

For total coverage 30 second charts for GBPCHF, GBPAUD, GBPCAD, GBPNZD and EURGBP. Some moved with the news trading deviation, others did not so well. Spreads on some of these pairs can be a problem. Some have less liquidity than the major pairs, however some have less 'attention' which can help depending on your trading platform.

UK Services PMI - Good sized deviation reverses after quick blip in risk-off market

The 3rd PMI figures in the series after Construction and Manufacturing and the largest sector of the UK economy. The past 3 months have been the same with this number with a move occurring before the release based on a rumor, or a leak, leading to a quick blip and then reversal. In these cases you can widen out the triggers and tighten one side if there appears to be a rumor lead move into the release time. The market was selling off based on problems with the European Banking sector specifically Italy's Unicredit got haulted limit down and Deutsche Bank was down after a rumor it was raising capital. The fears in the banking sector hit the Forex pairs with the Euro leading the way but the Pound and Aussie following close behind. About a half hour before the release the GBPUSD pair did manage to bounce about 25 pips or so off one of our key support levels of 1.5560 and rally up until 1.5585 as the news came out. It then did a pop of 10 pips and reversed right back down to quickly take out those scalp buyers and hitting 1.5550 which then came back up a bit. A +2.5 deviation on this really should have been enough to make the pound rally a bit more and in the context of risk-off parameters sparking the sell-off it was not so clear if the the sell-off or the bounce was the rumor-based lead-up into the release. Basically this makes 3 months of this and triggers have gone from +/-1.1 to +/-2.5 but this now gets slated to the watch list although 3 months ago these PMI figures were really blockbuster and making some good moves. This still could be down a bit to low volume.

Anyhow here are the figures:

UK PMI Services MoM
Estimates: Median 51.5 Average 51.4 Range 50.0 to 52.2 (51-52 most)
Actual: 54.0 Prior: 52.1 No Revisions

Here are some charts, first is the 10 second chart which shows the intial 10 pip blip and the subsequent scene of the crime as the former 1.5560 lows are tagge and then bounce right back to the former scene of the crime at 1.5580

Next is a 1 minute chart which shows the double bottom off 1.5560 that occurred in the half hour leading into the release and why this 18 minutes of price action was difficult to distinguish as a rumor lead rally into a positive number to sell into as broad-based market risk aversion reaffirmed its grasp on downward price action:

US ISM Non-Manufacturing - Nice Dev but muted action

This news figure has responded well to the small deviations the past 2 months but they were not big enough to get interesting in. Back in September there was a larger deviation but the spike was just a quick blip and then reversed for 45 minutes, but then later rallied...a fake out!

Today deviation was larger but still not big enough to get too interested in this other than quick scalps...

ISM non-manufacturing actual was 52.0 versus the expected 53.8

CADJPY did move down and continue to tick lower. About 20 minutes before the release Merkel and Sarkosy made some comments that brought a bit of risk appetite to the market.

UK Services PMI - Just a quick blip

UK Services PMI - Quick Blip
The price action response to this news has not been doing so well on this news release recently. September saw a big -2.9 drop and although it spike down 35 pips initially it quickly retraced. Likewise today a +1.6 did lead to a quick +20 pip blip higher which quickly reversed lower.

There was a rumor of a higher release during the London open although GBPUSD did not rally anymore than the EURUSD or AUDUSD was. Here is the 10 second chart of the price action after the release.

UK Services PMI - Rumor then Small Deviation but Big Move

UK Services PMI came out today, Wednesday Nov. 3rd 2010 during the European session. There was a rumor about 45 minutes before the news that the number was going to come out higher. The GBPUSD popped up about 20-25 pips, however the rumor was not reported on the audio news feed TradeTheNews until after this move from about 1.6045 to 1.6070, and after this blip up, cable just went sidewise until the release. So it really became a question of whether you decide to trust the rumor or not. See top chart to see the move before the news caused by this.

In this case the rumor was correct, however the deviation is not what is normally considered to be tradable....normally it is best to look for at least a deviation of +/- 1.0 from the average of all economist's estimates for the news release number. Today the deviation was just +0.6, however cable did move up eventually, this is unlike the -0.6 deviation in July where GBPUSD moved down 10 pips and then went flat for 15 minutes. In the first 10-15 seconds there was about a 20 pip whipsaw of about 20 pips, but this resolved and cable moved higher. Here is the number:

*(UK) OCT PMI SERVICES: 53.2 V 52.6E
- Prices Charged Index: 51.7 v 49.9 prior (highest level since Sept 2008)

You must also be aware that there was already a +20 pip move higher when the rumor of a higher number hit the price. Sometimes with the news you have what is called "Buy the rumor, sell the news", so you must always be careful about the possibility of this occuring. Cable broke the 1.6100 level it had failed to reach earlier in the week, and broke its highs since February of this year. I believe possibly the move was exaggerated by the stops which were taken out above this crucial level, however the British Pound has been over-reacting to news lately as with the Construction PMI yesterday. While this is good, the deviations used in the Profitmongers live forex and futures trade room were deduced after years of watching this news moves, and have a certain level of safety built into them. We must remember than we don't have to catch every move, and it is much better to have news overreacting than under-reacting. See the last chart for how far GBPUSD went over the next half hour after the news.