UK manufacturing output. Impact of news publication on the GBP/USD currency pair
Countries with developed industry have always been famous for their stable economy,
budget growth and rising social standards.
Thanks to the constant export of industrial products, the state forms reserves of foreign currency, which is so necessary to maintain the stability of the entire economy as a whole and the banking sector.
The amount of taxes collected from industry is simply huge and takes up the lion's share of the country's GDP.
Thus, industrial development is a direct path to economic growth and prosperity of any state.
What do you understand, the manufacturing industry occupies 80 percent of the total industrial production in Great Britain and includes such industries as ferrous metallurgy, non-ferrous metallurgy, chemical and oil refining industries, mechanical engineering, metalworking, light industry and many other industries.
Therefore, having learned the data on the volume of production in the manufacturing industry, one can draw general conclusions about the improvement or deterioration of both the industrial sector and the UK economy as a whole.
If we talk about the interpretation of news in trading, then an increase in production volume leads to a strengthening of the pound and its growth, and a fall in production volumes leads to a weakening of the pound and its rapid fall. However, in practice, when trading this news, the price does not behave as smoothly and logically as we would like, and the market reaction can be unpredictable.
In order to draw up a trading strategy for this news, I propose to consider the market reaction after the publication of data for the last four months on the GBP/USD currency pair , calculate how many points the chart takes on average, as well as approximately how long the effect of the news affects market participants.
07/07/2015 the data that was published tells us about a significant reduction in production volume, and if growth was predicted from -0.4 percent to 0.1 percent, then the reality turned out to be more severe and we received -0.6 percent. Thus, it was quite logical to expect a rapid fall in the chart of the GBP/USD currency pair due to such a strong weakening of GBP.
You can see how the bidders reacted in the picture below:
The chart shows a completely natural reaction of market participants, which led to the fact that the chart of the Pound/Dollar currency pair rapidly fell by 128 points. The news caused a strong reaction to the price, so the chart fell for 6 hours and 25 minutes. The end of the fall came after the market smoothly moved into a sideways movement.
08/06/2015 became a significant day for many analysts, since for the first time in a long period of time their forecasts came true, percentage to percentage. Thus, the expected growth in manufacturing output from -0.6 percent to 0.2 percent took place.
Therefore, it is quite expected that the chart of the GBP/USD currency pair will begin to grow rapidly. How the price reacted to the increase in production volume can be seen in the picture below:
Before the publication of this news, positive data on the US economy came out, which led to the beginning of the formation of a new trend. The publication of industrial data led to a new pullback of 30 points, which lasted for an hour and five minutes, after which the effect of the news was suppressed in the form of a strong drop in the chart towards a new movement.
On 09/09/2015, judging by the economic calendar , there was a strong drop in production volume in the manufacturing industry from 0.2 percent to -0.8 percent. This tells us about a strong deterioration in affairs in the industrial complex, which should immediately lead to a rapid fall in the chart of the GBP/USD currency pair. You can see the reaction to the negative data on GBP in the image below:
On the chart you can see a rather aggressive reaction of the market to negative news, which led to a sharp break in quotes and the formation of a gap . The effect of publishing the news lasted at least 2 hours and 50 minutes, and the price successfully moved 45 points towards the news.
The news ended with a classic price return to close the price gap.
On 10/07/2015, after such a significant drop in production volume, the manufacturing industry increased from -0.8 percent to 0.5 percent.
Such positive news should quickly find a response from market participants in the form of growth in the chart of the GBP/USD currency pair. How the price behaved for positive news can be seen in the picture below:
Despite the positive news, the market reaction was rather sluggish, so the price looked more like a wide sweeping flat . However, even if it took a long time, the news worked itself out, passing 56 points within 8 hours. The effect of the news was completed by a rollback and transition to a narrow sideways market.
When analyzing the market reaction to the release of this news, you understand that participants react quite ambiguously and sometimes very sluggishly. But no matter which option we consider, the price almost always goes towards the news.
Thus, if you set a stop order of 30 points and a profit of the same size, we get the following results: 30+30+30+30=120 points of profit. Therefore, in conclusion, we can say that the news can be applied in your trading, focusing on the minimum fixed goals during the above analysis.