Forex Market: GBP/USD daily trading forecast

Friday’s trade saw GBP/USD within the range of 1.5297-1.5384. The pair closed at 1.5304, down 0.29% on a daily basis, while breaking a string of three consecutive trading days of gains. The daily high has been the highest level since September 22nd, when the cross registered a high of 1.5531. In weekly terms, GBP/USD gained 0.80% last week, after showing no change in the week ended on October 4th.

At 8:12 GMT today GBP/USD was gaining 0.22% for the day to trade at 1.5361. The pair penetrated the upper range breakout level (R4), as it touched a daily high at 1.5367 at 8:03 GMT.

No relevant macroeconomic reports, which would influence GBP/USD trading, are scheduled for release today.

Columbus Day in the United States

Today is the Columbus Day federal holiday, which remembers Christopher Columbus’ arrival to the Americas on October 12th 1492. Columbus day is a public holiday in many parts of the United states, but is not observed or is not a holiday in some states. Government offices are generally closed, but businesses may remain open. Schools are not required to close and may decide to remain open or closed. The Columbus Day is a legal observance in Florida.

Correlation with other Majors

Taking into account the week ended on October 11th 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 NZD/USD (0.9044, or very strong)
GBP/USD to AUD/USD (0.8227, or very strong)
GBP/USD to EUR/USD (0.6022, or strong)
GBP/USD to USD/CHF (-0.5294, or strong)
GBP/USD to USD/CAD (-0.5638, or strong)
GBP/USD to USD/JPY (-0.8847, or very strong)

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

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

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.640% on October 9th, or the highest level since October 7th (0.645%), after which it closed at 0.615% to add 1.3 basis point (0.013 percentage point) compared to October 8th, while marking a fifth straight trading day of increase.

The yield on US 2-year government bonds climbed as high as 0.657% on October 9th, or matching the high from the previous day, after which it fell to 0.641% at the close to add 0.004 percentage point compared to October 8th, while marking a third consecutive trading day of increase.

The spread between 2-year US and 2-year UK bond yields narrowed to 0.026% on October 9th from 0.035% on October 8th. The October 9th yield spread has been the lowest one since October 6th, when the difference was 0.017%.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.875% on October 9th, or the highest level since September 22nd (1.882%), after which it slid to 1.861% at the close to add 3.5 basis points (0.035 percentage point) compared to October 8th. It has been the fifth consecutive trading day of increase.

The yield on US 10-year government bonds climbed as high as 2.138% on October 9th, or the highest level since September 28th (2.169%), after which it slipped to 2.090% at the close to lose 1.2 basis point (0.012 percentage point) compared to October 8th. It has been the first drop in the past three trading days.

The spread between 10-year US and 10-year UK bond yields narrowed to 0.229% on October 9th from 0.276% on October 8th. The October 9th yield difference has been the lowest one since October 6th, when the spread was 0.226%.

Daily and Weekly Pivot Levels

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

R1 – 1.5312
R2 – 1.5320
R3 (range resistance) – 1.5328
R4 (range breakout) – 1.5352

S1 – 1.5296
S2 – 1.5288
S3 (range support) – 1.5280
S4 (range breakout) – 1.5256

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

Central Pivot Point – 1.5274
R1 – 1.5414
R2 – 1.5524
R3 – 1.5664

S1 – 1.5164
S2 – 1.5024
S3 – 1.4914