Score 7.9 (out of 10): GBP / USD could be impacted by macro data and decline -8% over next 6 months

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What’s Going On Here?

The ISM New Orders index tends to be a leading indicator for future economic growth. After a long period of expansion, it has just dropped below 50.0 – which indicates the start of a contraction. But is this always seen as negative for assets?

Why Now?

GBP / USD indicates an interesting sell set up for the next 6 months. During the previous 5 instances when the ISM Manufacturing New Orders fell below 50 for the first time in a year (as has just happened), GBP / USD declined by -7.9% during the following 6 months, with a hit ratio of 80%. This sell signal received a high score of 7.9 (out of 10). This insight was generated with a closing price of 1.1834

What’s This Company About?

GBP / USD is in the Currency Exchange rate business. Based on the last 2 years’ risk/return profile, this asset is seen as Very Risky. Ticker symbol: GBPUSD

What’s My Risk / Reward and Time Horizon?

We found 6 months to be the optimal trade horizon, after testing a number of possible alternatives (accuracy of previous returns). Otherwise consider closing out this trade once the target level of 1.09 (-7.9%) has been reached. Based on GBP / USD’s recent up and down swings, LongShortBets suggests considering to set a stop loss level for this insight at 1.18 (last price at 1.1834), which is equivalent to a 0% rally.

Returns during similar periods:

The chart above shows the previous returns (in %) based on similar setups with the most recent ‘insight’ shown under (1), the second most recent ‘insight’ under (2), etc.

Previous episodes:

1.2% (2019-08-30), -7.9% (2015-12-31), -2.8% (2012-06-29), -9.8% (2009-06-30), -26.8% (2007-12-31)

Historical Chart:

Summary:

NameGBP / USD
ViewUp
Star (1 to 10)7.8
Target-8.0%
Time6 months
Hit Rate80%

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