Forex Market: GBP/USD daily trading outlook

Yesterdays trade saw GBP/USD within the range of 1.5789 – 1.5664 to settle 0.3% higher at 1.5738.

At 07:17 GMT today GBP/USD was down 0.17% to trade at 1.5709. The cross held in a daily range of 1.5720 – 1.5740 and is down 0.3% for the week so far.

Fundamentals

United Kingdom

The final estimate of the United Kingdoms GDP will probably show that the economy expanded at a rate of 2.5% in the first quarter of 2015 compared to the same period a year ago, up from a revised preliminary reading of 2.4% released on May 28th. The British economy grew at an annualized rate of 3.0% in the fourth quarter of 2014, according to final data, following up on a 2.6% expansion in the previous three months. On a quarterly basis, GDP growth is projected at 0.4%, compared to a revised reading of 0.3% released on May 28th and a 0.6% growth in the fourth quarter.

The GDP represents the total monetary value of all goods and services produced by the nation over a specific period of time. What is more, it is the widest indicator of economic activity in the country. The report on GDP is of huge importance for traders because they will look for higher rates of growth as a sign that interest rates may follow the same direction. Higher interest rates will usually attract more investors, willing to purchase assets in the UK, which in turn will increase demand for the pound. Therefore, in case growth rate were to exceeded market expectations, this would provide support to the local currency. The Office for National Statistics will publish the final GDP estimate at 08:30 GMT.

Meanwhile, Britains current account deficit probably shrank to 23.8 billion pounds during the first quarter of the year, the statistics agency is expected to report, from a deficit figure of 25.3 billion in the fourth quarter and a record 27.7 billion in Q3 2014.

The current account represents the sum of a nations balance of trade, net factor income (interest and dividends) and net transfer payments (foreign aid). A current account deficit suggests that the country has a status of a net borrower from the rest of the world. A net borrower is consuming more than it is producing, which means that other countries are lending it their savings. This way foreign liabilities are created. A contracting deficit on the United Kingdoms current account would have a bullish effect on the sterling, and vice versa.

United States

Redbook Research Inc. will release its Johnson Redbook Index for the seven days through June 27th. This metric measures the growth in US retail sales and is based on sales data provided by around 9 000 large general merchandise retailers representing over 80% of the equivalent “official” retail sales series published by the Commerce Department. The year-over-year value of the metric was at 1.6% for the seven days through June 20th, while the month-on-month reading came in at -1.6%. The fresh data are due out at 12:55 GMT.

At 13:00 GMT, Standard & Poors will release its S&P/Case-Shiller House Price Index, which measures the change in prices of single-family homes in 20 metropolitan areas across the US. The report serves as a gauge of the US housing markets health. According to preliminary estimates, the respective home prices probably rose by a seasonally adjusted 0.8% in April on a monthly basis, compared to 1.0% in March, while marking a 5.5% jump on an annual unadjusted basis, up from the previous months 5.0% rise.

A separate report by the Conference Board will likely show at 14:00 GMT that consumer confidence in the US improved for a third month in June. The corresponding CB Consumer Confidence index is expected to come in at 97.3 from an unrevised 95.4 in May and a downward-corrected drop to 94.3 in April from 101.4 in March.

This gauge measures the level of consumer confidence in the US economy and serves as a leading indicator to predict consumer spending, which accounts for a major part of a countrys gross domestic product. Therefore, a higher-than-expected reading should be seen as dollar-positive, and vice versa.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5730. In case it penetrates the first resistance level at 1.5797, it will encounter next resistance at 1.5855. If breached, upside movement may attempt to advance to 1.5922.

If the cross drops below its S1 level at 1.5672, it will next see support at 1.5605. If the second key support zone is breached, downward movement may extend to 1.5547.

In weekly terms, the central pivot point is at 1.5776. The three key resistance levels are as follows: R1 – 1.5887, R2 – 1.6021, R3 – 1.6132. The three key support levels are: S1 – 1.5642, S2 – 1.5531, S3 – 1.5397.