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Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5089-1.5146. The pair closed at 1.5117, ticking up 0.01% on a daily basis, while extending gains from Monday. The daily high has been the highest level since last Friday, when the cross registered a high of 1.5221. In weekly terms, GBP/USD depreciated 2.46% last week, or at the sharpest rate since the week ended on March 8th, when it plummeted 2.57%.

At 8:18 GMT today GBP/USD was gaining 0.33% for the day to trade at 1.5168. The pair touched a daily high at 1.5186 during early Asian trade, overcoming the upper range breakout level (R4). GBP/USD encountered resistance within the area 1.5170-1.5180 on several occasions on Wednesday, while a break and close above it may send the pair up for a test of November 6th high of 1.5221.

Today GBP/USD trading may be influenced by the macroeconomic report listed below.

Fundamentals

United Kingdom

Claimant count change, ILO Unemployment rate

The number of jobless claims in the United Kingdom probably increased for a third consecutive month in October, going up by 1 500, according to market expectations, following an increase by 4 600 in September. At the same time, the claimant count rate, which represents the percentage change of jobless claims compared to the entire work force, probably remained steady at 2.3% for an eighth straight month in October. It has been the lowest claimant count rate in at least 8 years.

The rate of unemployment in the UK, estimated in accordance with ILO (International Labour Organization) standards, probably remained steady at 5.4% during the three months to September compared to the same period a year ago. It has been the lowest rate since the period March to May 2008, when a level of 5.2% was reported. During the three-month period to July the unemployment rate was reported at 5.5%.

During the period June-August there were 31.12 million people in employment, or an increase by 140 000 compared to the three months to May 2015. Compared to June-August 2014, the figure represented an increase by 359 000. 22.77 million people were in full-time employment during the period June-August, or 291 000 more compared to the same period a year earlier. At the same time, 8.35 million people were in part-time employment, an increase by 68 000 compared to a year ago. The rate of employment was registered at 73.6%, or the highest on record.

During the period June-August 1.77 million people were unemployed, or 79 000 fewer than during the three months to May. Compared to June-August 2014, the figure represented a decrease by 198 000.

In June to August 2015 there were 9.01 million people aged between 16 and 64, who were out of work and not seeking or available for employment, according to data by the Office for National Statistics (ONS). This represented an insignificant change compared to the three-month period to May 2015 and a decrease by 13 000 compared to the period June-August 2014.

Average earnings including bonuses probably went up 3.2% during the three months to September compared to the same period a year ago. If so, it would be the largest annual total pay growth since the three-month period to May 2015. Pay growth has been well above the rate of consumer inflation since the beginning of the year, which led to a sound increase in real income.

The rate of unemployment refers to the percentage of economically active people, who are currently unemployed. According to the ILO approach, people who are considered as unemployed are either: 1) out of work, but are actively searching for employment, or 2) out of work and are waiting to be hired again during the next two weeks.

In case the number of claims increased at a lesser rate than anticipated and the rate of unemployment met expectations of fell even further, this would have a moderate-to-strong bullish effect on the pound. The official report by the ONS is due out at 9:30 GMT.

United States

Veterans Day

Today is the Veterans Day public holiday in the United States, which honors all individuals who have served in the US military. American citizens observe this day by attending ceremonies and parades, where veterans are allowed to talk about their time in the service and to receive gratitude for their sacrifice. Banks in the country are to remain closed.

Correlation with other Majors

Taking into account the week ended on November 8th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

GBP/USD to AUD/USD (0.8787, or very strong)
GBP/USD to EUR/USD (0.8651, or very strong)
GBP/USD to NZD/USD (0.7898, or strong)
GBP/USD to USD/CHF (-0.9365, or very strong)
GBP/USD to USD/JPY (-0.9408, or very strong)
GBP/USD to USD/CAD (-0.9427, or very strong)

1. During the examined period GBP/USD moved almost equally in one and the same direction with AUD/USD and EUR/USD.

2. GBP/USD moved strongly in one and the same direction with NZD/USD during the past week.

3. GBP/USD moved almost equally in the opposite direction compared to USD/CHF, USD/JPY and USD/CAD. This relationship has been the most pronounced between GBP/USD and USD/CAD.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.729% on November 10th, after which it closed at 0.696% to lose 2.2 basis points (0.022 percentage point) compared to November 9th. It has been the second straight trading day of decline.

The yield on US 2-year government bonds climbed as high as 0.891% on November 10th, after which it closed at 0.874% to lose 1.6 basis points (0.016 percentage point) compared to November 9th. It has been the first drop in the past seven trading days.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.178% on November 10th from 0.172% on November 9th. The November 10th yield spread has been the largest one since June 12th, when the difference was 0.181%.

Meanwhile, the yield on UK 10-year government bonds soared as high as 2.058% on November 10th, after which it slid to 2.029% at the close to lose 1.8 basis points (0.018 percentage point) compared to November 9th. It has been the second drop in the past seven trading days.

The yield on US 10-year government bonds climbed as high as 2.353% on November 10th, after which it slipped to 2.336% at the close to lose 1.3 basis points (0.013 percentage point) compared to November 9th. It has been the first drop in the past seven trading days.

The spread between 10-year US and 10-year UK bond yields widened to 0.307% on November 10th from 0.302% on November 9th. The November 10th yield difference has been the largest one since September 28th, when the spread was 0.320%.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:

R1 – 1.5122
R2 – 1.5127
R3 (range resistance) – 1.5133
R4 (range breakout) – 1.5148

S1 – 1.5112
S2 – 1.5107
S3 (range support) – 1.5101
S4 (range breakout) – 1.5086

By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:

Central Pivot Point – 1.5191
R1 – 1.5358
R2 – 1.5667
R3 – 1.5834

S1 – 1.4882
S2 – 1.4715
S3 – 1.4406

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