Forex Signal (Monday March 5, 2012 – 4:30am EDT) – UK Services PMI

Stavro D'Amore

Former FPA Special Consultant
Hello all,

Today we have UK Services PMI is a leading indicator and it is monthly, on the third business day after the month ends. Traders look at this indicator because It's a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy

UK Services PMI
Forecast 55
Previous 56
Pair to trade: GBP/USD

Numbers we need:

Economical Impact: High
Typical Result: Good for Currency
Occurrence: monthly, on the third business day after the month ends
Spike Probability: Good, we can see 30 pips on initial spike

About our Triggers:
UK Services PMI forecasted to arrive at 55
We are looking for a deviation of 2.5 to the upside to BUY GBP/USD and a deviation of 2.5 to the downside to SELL GBP/USD
So the summary is we get 57.5 or better I will look to enter a LONG position on GBP/USD and if we get 52.5 or lower I will go SHORT on GBP/USD
Should this report be triggered, we can expect to see about 30 pips on the initial spike .
This trade will have a good chance of a 30% retrace on the initial spike so I recommend trading the retracement method as stated bellow.

What is it? And why does the market care?
UK Services PMI measures the activity level of purchasing managers in the services sector.
Any reading above 50 indicates expansion, while a reading below 50 indicates contraction.
It gives an indication about the health of the services industry in the UK. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

A higher than expected reading should be taken as positive/bullish for the GBP
A lower than expected reading should be taken as negative/bearish for the GBP.

Method I use to trade this:
Stavro D’Amore Trading Method

See my Views on current Euro crisis

I do recommend spike trading as an option. If you are using an ECN broker or a broker that allows spike fills. Please use no more than a 15 pip limit order to control slippage.

I will look for a 30% retracement in the original spike if our triggers are hit before entering. I will be looking at a 5 minute chart. I will sell half my position as soon as I hit the original high point of the first initial spike and place a SL at the original spike price.

My TP level would be just before a resistance level or if the chart decides to form a support level, looking at a 15 minute chart time frame to analyze this.

Historical Chart and Data for UK Services PMI

All the best

Stavro D’Amore
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