Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.6049-1.6128. The pair closed at 1.6085, losing 0.04% on a daily basis.

At 7:58 GMT today GBP/USD was down 0.23% for the day to trade at 1.6046. The pair broke the first key daily support and touched a daily low at 1.6033 at 7:42 GMT.

Fundamental view

United Kingdom

The cost of living in the United Kingdom was probably reduced, with the CPI being at 1.4% in September from a year ago, according to the median estimate by experts. In August the annualized consumer inflation was reported at 1.5%, down from 1.6% in July. The largest downward contributions to the change in the CPI 12-month rate between July and August this year came from food and non-alcoholic beverages, with prices falling 0.2% between July and August this year. Prices of food and non-alcoholic drinks rose 0.5% between the same two months a year ago. According to data by the Office for National Statistics (ONS), the largest upward contributions to the change in the CPI 12-month rate between July and August 2014 came from clothing and footwear, as prices climbed 2.6% between July and August this year in comparison with a more modest increase of 2.0% between the same two months in 2013.

The CPI is the main measure of inflation in the UK for macroeconomic purposes and forms the basis of the inflation target set by the government. Every month about 120 000 samples are made, examining the change in prices of about 650 products. They represent the “market basket” of goods and services, on which the index is based.

Key categories in the consumer price index are Transport (accounting for 16.2% of the total weight) and Housing, Water, Electricity, Gas and Other fuels with a 14.4% share. Recreation and Culture accounts for 13.4%, Restaurants and Hotels – 11.4% and Food and Non-alcoholic Beverages – 11.2%. The CPI also encompasses Miscellaneous Goods and Services (9.6%), Clothing and Footwear (6.5%), Furniture, Household Equipment and Maintenance (6.1%). Alcoholic Beverages and Tobacco, Health, Communication and Education comprise the remaining 11.2% of the total weight.

The Core consumer price index probably dipped to 1.8% in September compared to the same month a year ago, from 1.9% in August. The core CPI measures the change in prices of goods and services purchased by consumers, without taking into account volatile components such as food, energy products, alcohol and tobacco.

United States

The United States probably recorded a government budget surplus of 82.3 billion USD in September, according to market expectations, after a deficit of 128.71 billion USD during the previous month. The latter was a 13% smaller deficit figure compared to the same month a year earlier. The year-to-date deficit was at the amount of 589 billion USD at the end of August, or the lowest figure in six years. In August receipts increased to 194 billion USD, or an increase by 5% year-on-year, while the outlays dropped 3% to reach 323 billion USD. A wider than projected surplus would have a bullish effect on the greenback. The Financial Management Service, US Treasury is to release the official figure at 18:00 GMT.

Technical view

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.6087. In case GBP/USD manages to breach the first resistance level at 1.6126, it will probably continue up to test 1.6166. In case the second key resistance is broken, the pair will probably attempt to advance to 1.6205.

If GBP/USD manages to breach the first key support at 1.6047, it will probably continue to slide and test 1.6008. With this second key support broken, the movement to the downside will probably continue to 1.5968.

The mid-Pivot levels for today are as follows: M1 – 1.5988, M2 – 1.6028, M3 – 1.6067, M4 – 1.6107, M5 – 1.6146, M6 – 1.6186.

In weekly terms, the central pivot point is at 1.6082. The three key resistance levels are as follows: R1 – 1.6224, R2 – 1.6369, R3 – 1.6511. The three key support levels are: S1 – 1.5937, S2 – 1.5795, S3 – 1.5650.