Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5176-1.5088. The pair closed at 1.5120, down 0.21% for the day.

At 07:22 GMT today GBP/USD was down 0.03% for the day to trade at 1.5115. The cross held in a daily range between 1.5103 and 1.5139.

Fundamental view

United Kingdom

Activity growth in the United Kingdom’s sector of construction probably slowed down further in April, with the corresponding PMI projected to come in at 57.5, down from 57.8 in March. The gauge was at a four-month high of 60.1 in February.

The index is based on a survey encompassing managers of companies operating in the construction sector. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify that activity in the sector has expanded. Higher-than-projected readings would certainly heighten the appeal of the pound. The Chartered Institute of Procurement & Supply (CIPS) is to announce the official reading at 8:30 GMT.

United States

The deficit on the US balance of trade probably widened back to $41.30 billion in March after narrowing to $35.44 billion in February from $42.68 billion in January. Februarys reading was the lowest since November 2013.

The trade balance, as an indicator, measures the difference in value between the country’s exported and imported goods and services during the reported period. It reflects the net export of goods and services, or one of the components to form the Gross Domestic Product. Generally, exports are linked to economic growth, while imports indicate how strong domestic demand is. In case the trade balance deficit shrank more than anticipated, this would heighten demand for the greenback. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.

Services activity

Activity in the US sector of services probably grew slower in April from a month earlier, with the final monthly reading expected to confirm a preliminary value released April 27th of 57.8. The gauge was at 59.2 in March.

The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). Higher-than-expected PMI readings would support the US dollar. Markit Economics will release the report at 13:45 GMT.

The Institute for Supply Management will release its separate and more widely tracked report on US services sector growth at 14:00 GMT. The ISM is expected to report an April reading of 56.3, compared to 56.5 in March. The metric has remained above the expansion-contraction threshold of 50 since December 2009. This is a compound index based on the values of four equally-weighted components that comprise it. These sub-indexes reflect seasonally-adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.

The business report is based on data compiled from monthly replies to questions asked of over 370 purchasing and supply executives operating in over 62 different industries, which represent nine divisions from the Standard Industrial Classification (SIC) categories.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% of the participants reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of optimism (expanding activity). A better-than-expected reading would boost the US dollar, and vice versa.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5128. In case it penetrates the first resistance level at 1.5168, it will encounter next resistance at 1.5216. If breached, upside movement may attempt to advance to 1.5256.

If the cross drops below its S1 level at 1.5080, it will next see support at 1.5040. If the second key support zone is breached, downward movement may extend to 1.4992.

In weekly terms, the central pivot point is at 1.5248. The three key resistance levels are as follows: R1 – 1.5391, R2 – 1.5641, R3 – 1.5784. The three key support levels are: S1 – 1.4998, S2 – 1.4855, S3 – 1.4605.