Profit Mongers @ 3:07 AM, Monday December 05 2011
04:30 GBP Services PMI (50.5 exp, 51.3 prior, 50.0 to 51.8 range)
Only a small -0.7* deviation last month and cable initially went slightly higher only
about 10-15 pips then chopped about..about 20 minutes after the release it did then
start to rally. The market could have been responding to the fact that the figure could
have come out below the key contraction/expansion number of 50. So relatively this was
good that it did come out above this and the market took this as a cue to buy cable. The
pound has benefited from its new safe-have status the past couple of months. Not that the
UK's economy is particularily good, but rather Sterling is a comparibly safer place to put
your money that the Euro at the moment. October's +2.4, seemed to get leaked and cable did
go up before the official release. So after the release it pulled back and then retested
the highs, but did not go further. Not a great response to this but probably due to some
leak, so watch out for any moves before the release and widen triggers out if necessary.
You can also tighten the triggers depending the rumor/leak going into the release, and of
course the price action response to that leak/rumor. Say cable heads higher before the
release on a rumor of a good release, then you can tighten the sell trigger as that price
action based on the rumor of a positive figure will unwind if that is not the case. The
September -2.9* was a big deviation but the was very quick, it moved 35 pips down and then
reversed and after 5 minutes was above pre-release...so we have to be careful and widen
out triggers because of this. We have used triggers as low as +/-1.1 but for now we will
have to use +/-2.5 until we start to see evidence of better moves. The range of estimates
is quite tight this time...so +/-2.0 is possible for more aggressive traders with fast
execution and good slippage control. There has been early chatter of a higher number but
cable is not particularily stronger in comparison to the other majors. (ie Euro & aussie
are also up so far since London open)
-If it is 53.0 or higher, GBP/USD should rally 45-75 pips
-If it is 48.0 or lower, GBP/USD should drop 45-75 pips
* FPA is slightly wrong
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