Forex Market: GBP/USD trading outlook for August 8th 2016

August 8, 2016 7:13 am

Friday’s trade (in GMT terms) saw GBP/USD within the range of 1.3022-1.3177. The pair closed at 1.3070, shedding 0.28% compared to Thursday’s close. It has been the 168th drop in the past 310 trading days and also a third consecutive one. The daily low has been the lowest level since July 12th, when a low of 1.2972 was registered. In weekly terms, GBP/USD lost 1.24% of its value during the past week. It has been the 16th drop in the past 31 weeks and also the steepest one since the week ended on July 8th, when the cross tumbled 2.46%. The major pair has extended its decline to 1.24% so far during the current month, after losing 0.59% of its value in July.

At 7:10 GMT today GBP/USD was inching down 0.07% on the day to trade at 1.3061. The pair touched a daily high at 1.3098 during the early phase of the Asian trading session, making an exact test of the daily R2 level, and a daily low at 1.3045 during early European trade.

No relevant macroeconomic reports and other events, which may influence GBP/USD trading, are scheduled on Monday (August 8th).

Correlation with other Majors

Taking into account the business week ended on August 5th 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 EUR/USD (0.8294, or very strong)
GBP/USD to NZD/USD (0.6588, or strong)
GBP/USD to USD/CAD (-0.1528, or weak)
GBP/USD to AUD/USD (-0.2030, or weak)
GBP/USD to USD/JPY (-0.5340, or strong)
GBP/USD to USD/CHF (-0.7323, or strong)

1. During the examined period GBP/USD moved strongly in one and the same direction with NZD/USD, while moving strongly in the opposite direction compared to USD/JPY and USD/CHF.

2. GBP/USD moved almost equally in one and the same direction with EUR/USD during the past week.

3. The correlation between GBP/USD and USD/CAD, GBP/USD and AUD/USD was insignificant.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.155% on August 5th, after which it closed at 0.153% to lose 3.2 basis points (0.032 percentage point) compared to August 4th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.726% on August 5th, or the highest level since July 29th (0.750%), after which it fell to 0.725% at the close to add 7.8 basis points (0.078 percentage point) compared to August 4th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.572% on August 5th from 0.526% on August 4th. The August 5th yield spread has been the highest one since July 28th, when the difference was 0.585%.

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 – 1.3084
R2 – 1.3098
R3 (Range Resistance – Sell) – 1.3113
R4 (Long Breakout) – 1.3155
R5 (Breakout Target 1) – 1.3205
R6 (Breakout Target 2) – 1.3226

S1 – 1.3056
S2 – 1.3042
S3 (Range Support – Buy) – 1.3027
S4 (Short Breakout) – 1.2985
S5 (Breakout Target 1) – 1.2935
S6 (Breakout Target 2) – 1.2914

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

Central Pivot Point – 1.3155
R1 – 1.3289
R2 – 1.3507
R3 – 1.3641
R4 – 1.3774

S1 – 1.2937
S2 – 1.2803
S3 – 1.2585
S4 – 1.2366

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

Central Pivot Point – 1.3171
R1 – 1.3546
R2 – 1.3858
R3 – 1.4233
R4 – 1.4608

S1 – 1.2859
S2 – 1.2484
S3 – 1.2172
S4 – 1.1860

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