Trade of the Day: GBP/USD 24th July 2014

French Flash Manufacturing PMI

The Forex market observed few key economic data releases throughout the day. During the morning, at GMT 7 a.m., the Markit released the French flash manufacturing PMI. It measures a level of diffusion index, which derives from a survey conducted on purchasing managers from the French manufacturing sector.

The manufacturing PMI is considered a leading fundamental indicator that gauges the economic well-being of a country. Usually, purchasing managers have the most recent data about the economy because if the sales of business is slowing down, it will likely reduce its spending. Hence, the PMI figure is considered a vital indicator.

The index score came out at 47.6, against a forecast of 48.5. Since any figure below the 50.0 threshold signifies an industry contraction, it affected the investor confidence negatively regarding the Euro.

German Flash Manufacturing PMI

Half an hour later, at GMT 7:30 a.m., the Markit also released the German flash manufacturing PMI. The German PMI figure came out at 52.9, a bit higher from the previously estimated 52.2, driving the overall market sentiment to a neutral position about the Euro.

US Unemployment Claims

Later, during the afternoon, at GMT 12:30 p.m., the United States Department of Labour released the most anticipated fundamental data of the week, the unemployment claims figure. Since the unemployment claims measure the number of people who filed for unemployment insurance during the past week, it indicates the overall situation in the job market.

The advance figure for seasonally adjusted initial claims figure came out at 284,000, much better than the forecast of 310,000 claims. During the previous week, it was at 303,000. Therefore, over the past week, the unemployment claims came down by 6.27 percent.

This level of initial claims is the lowest since February 18, 2006 when it came out at 283,000. A better than expected claims figure meant that the job market in the United States has improved significantly on a week-over-week basis, which drove the GBP/USD price downwards during the afternoon.

Trade Recommendation for the GBP/USD

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The GBP/USD has been trending downwards since July 15. It appears that better than expected US unemployment claims figure will likely fuel the downtrend. Nevertheless, if the pair tries to move north, the short-term resistance for the GBP/USD should come around the 1.7025 level, where it intersects with the current downward sloping trend line on the hourly time frame.

Since the overall market sentiment and fundamental outlook for the GBP/USD is indicating a further decline, it indicates a potential PUT position in the GBP/USD.

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Asif Imtiaz

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