Binary Options Analysis – Trade of the Week: GBP/USD 2nd February 2015

United Kingdom – Manufacturing Purchasing Managers’ Index (PMI)

At GMT 9:30 a.m., the Markit released the United Kingdom’s manufacturing Purchasing Managers’ Index (PMI), which measures the level of a diffusion index by surveying 600 purchasing managers in the UK’s manufacturing sector.

Since businesses react quickly to a changing market situation, their purchasing managers are usually the most updated and hold the relevant insight into their respective company’s stance regarding the economy. Such insight extends to, but not limited to, employment situation, production, new orders, prices, supplier situation and their own inventories. Therefore, binary options traders and market analysts consider the manufacturing PMI figure to be one of the most important leading indicators of the UK’s economy.

Last month, in January, the UK’s manufacturing PMI figure came out at 52.7 and the forecast for this month was set at 52.9. However, the actual figure came better than what the market was expecting, at 53.0.

United States – Personal Spending

Later in the afternoon, at GMT 1:30 p.m., The US Bureau of Economic Analysis released the month-over-month personal spending figure, which measures the changes in the value of all expenditure made by US consumers over the past month. This figure is adjusting for any inflationary effect in order to represent the “real” value of the consumer spending.

Although the retail sales data covers the consumer spending, the actual consumer spending tends to be perceived by binary options traders as the key data on the subject. This is because consumer spending accounts for a large portion of the national economic activity and have a hefty impact on the GDP.

Last month, the US consumer spending increased by 0.5% and the forecast for this month was set at a decrease of 0.1%. However, regardless of the forecasted GDP growth in the United States amid lower fuel price, the month-over-month consumer spending actually went down by 0.3% over the reported month.

Trade Recommendation for the GBP/USD

Chart GBPUSD, D1, 2015.02.02 15:13 UTC

The down trend in the GBP/USD, which started back in July 2014, has accelerated in the last two weeks after the pair broke below the significant support around the 1.5600 level. While there is no sign of the change in the overall trend at the moment, today’s fundamental data is suggesting that the down trend might be losing momentum this week. Especially, the slowdown in the US consumer spending would be considered by binary options traders as a red flag, as the bulk of the US economy heavily depends on the retail sector. On the other hand, the UK’s manufacturing PMI reading increased to 53.0, indicating a strong forward trend in the British economy, which would help support the valuation of the Pound.

Regardless, the conservative target for the GBP/USD is still around the 423.6% Fibonacci extension level of the last major upward swing towards the down trend line, at 1.4528. Given that the down trend is still strong and there is no sign of any break above the trend line, it is highly recommended that binary options investors consider placing a PUT order once the GBP/USD price breaks below the 1.4950 level with a possible exit target around the 1.4530 area.

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About our Forex Analyst:  Asif Imtiaz

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