Forex Trading Plan For UK Services PMI 11/03/11

We´ll be trading the UK Services Purchasing Manager Index today at 4:30am (NY Time). This is a leading indicator similar to the Manufacturing PMI that was released early this week, here´s the forecast:

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5:30am (NY Time) UK Services PMI Forecast 52.0 Previous 52.9
ACTION: GBP/USD BUY 54.5 SELL 49.5

The Services PMI is tradable with a minimum deviation of 2.5 between the forecast and the actual release. If we get at least 54.5 or better, we could see some demand in the GBP and we will consider BUYING GBP/USD or GBP/JPY pairs. If we get a 49.5 or lower, GBP could weaken and we should look to SELL GBP/USD or GBP/JPY pairs. If the actual release is below the medium 50 level, then we should jump in (spike trade) and SELL GBP/USD or GBP/JPY pairs.

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Important Note: The only time I´d recommend a spike trade is when there is momentum pushing the currency which, regardless of spread and slippage, could result in a profit if you hold on to the trade.

Use the after-news trading method. For more information on my methods:
http://www.currencynewstrading.com/how-to-get-started-with-news-trading/

The Market
UK economy is finally showing signs of recovery as recent data suggests higher economic activities in the retail sector plus the surprising better than expected 3rd quarter GDP release.  With MPC increasing government stimulus by another 75 billion pound, the outlook for UK’s economy is looking better than last month… However, the persistent inflationary pressure and the high levels of unemployment are still huge concerns for the UK economy, not mentioning the EU area wide sovereign debt crisis, therefore I wouldn’t bet the farm just yet on sterling.

Additional Thoughts
UK´s economy is 87% Services related. If we get a strong release on this PMI, we could see GBP sentiment turn bullish regardless of the fact that the PMI release doesnt change the long-term trend. As a leading indicator released early in the month, it helps to define the trend for the rest of the month.

Pre-News Consideration
There is no pre-news consideration for this release…

DEFINITION:
The Chartered Institute of Purchasing and Supply (CIPS) Services Purchasing Manager´s Index (PMI) measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation´s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company´s performance, which can be a leading indicator of overall economic performance.

Thanks,

 

About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

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