Forex Market: GBP/USD daily trading outlook

July 11, 2016 6:54 am

Friday’s trade (in GMT terms) saw GBP/USD within the range of 1.2881-1.3018. The pair closed at 1.2952, rising 0.33% compared to Thursday’s close. It has been the 132nd gain in the past 290 trading days and also the sharpest one since June 29th. In weekly terms, GBP/USD lost 2.31% of its value during the past week. It has been the 14th drop in the past 27 weeks and also a third consecutive one. The major pair has pared its slump to 2.49% so far during the current month, after depreciating 8.06% in June.

At 6:53 GMT today GBP/USD was inching up 0.04% on the day to trade at 1.2957. The pair touched a daily high at 1.2981 during the late phase of the Asian trading session, making an exact test of the daily R2 level, and a daily low at 1.2928 during early Asian trade.

On Monday GBP/USD trading may be influenced by the following event as listed below.

Fundamentals

United States

Fed’s George statement

At 14:00 GMT the Federal Reserve President for Kansas City, Esther George, is expected to take a statement. Any remarks or hints in regard to economic outlook, or the Bank’s monetary policy stance would heighten USD volatility.

Correlation with other Majors

Taking into account the business week ended on July 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 USD/JPY (0.9005, or very strong)
GBP/USD to EUR/USD (0.8693, or very strong)
GBP/USD to AUD/USD (0.2020, or weak)
GBP/USD to NZD/USD (0.0640, or very weak)
GBP/USD to USD/CHF (-0.6825, or strong)
GBP/USD to USD/CAD (-0.8896, or very strong)

1. During the examined period GBP/USD moved strongly in the opposite direction compared to USD/CHF.

2. GBP/USD moved almost equally in one and the same direction with EUR/USD and USD/JPY during the past week, while moving almost equally in the opposite direction compared to USD/CAD.

3. GBP/USD moved almost independently compared to NZD/USD during the period in question.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.185% on July 8th, after which it closed at 0.123% to lose 2.2 basis points (0.022 percentage point) compared to July 7th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.657% on July 8th, or the highest level since June 24th (0.755%), after which it fell to 0.613% at the close to add 2 basis points (0.02 percentage point) compared to July 7th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.490% on July 8th from 0.448% on July 7th. The July 8th yield spread has been the highest one since June 2nd, when the difference was 0.503%.

Daily, Weekly and Monthly Pivot Levels

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

R1 – 1.2969
R2 – 1.2981
R3 (Range Resistance – Sell) – 1.2994
R4 (Long Breakout) – 1.3031
R5 (Breakout Target 1) – 1.3075
R6 (Breakout Target 2) – 1.3094

S1 – 1.2943
S2 – 1.2931
S3 (Range Support – Buy) – 1.2918
S4 (Short Breakout) – 1.2881
S5 (Breakout Target 1) – 1.2837
S6 (Breakout Target 2) – 1.2818

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

Central Pivot Point – 1.3031
R1 – 1.3266
R2 – 1.3576
R3 – 1.3811
R4 – 1.4046

S1 – 1.2721
S2 – 1.2486
S3 – 1.2176
S4 – 1.1866

In monthly terms, for GBP/USD we have the following pivots:

Central Pivot Point – 1.3817
R1 – 1.4517
R2 – 1.5722
R3 – 1.6422
R4 – 1.7121

S1 – 1.2612
S2 – 1.1912
S3 – 1.0707
S4 – 0.9501

Where to Trade

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