Forex Signal (Thursday March 1, 2012 – 4:30am EDT) – UK Manufacturing PMI

Stavro D'Amore

Former FPA Special Consultant

Please find my trade plan below

UK Manufacturing PMI
Forecast 52.0
Previous 52.1
Pair to trade: GBP/USD

Numbers we need:
BUY GBP/USD if we get 54.0 or higher
SELL GBP/USD if we 50.0 or lower

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

About our Triggers:
UK Manufacturing PMI is forecasted to arrive at 52.0
We are looking for a deviation of 2 either way on this trade.
If we get 54 or better I will look to enter a LONG position on GBP/USD and if we get
50 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. We have no known conflict for this release. This trade will have a good chance of a 30% retrace on the initial spike, please use 10 pip slippage controls or limit order

What is it? And why does the market care?
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. 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

I will look for a 30% retracement in the original spike before entering a trade; I will Close half my position as soon as I hit the original high point of the first initial spike and place a SL at entry 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.

I do recommend spike trading as an option; also the liquidity is very good at the moment if you are using an ECN broker.

Historical Chart and Data for UK Manufacturing PMI

All the best

Stavro D’Amore