Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5367-1.5509. The pair closed at 1.5394, down 0.16% on a daily basis, while marking its third consecutive trading day of losses. The daily low has been the lowest level since October 14th, when the cross registered a low of 1.5244.

At 7:17 GMT today GBP/USD was up 0.05% for the day to trade at 1.5401. The pair made an attempt to test the daily R2 level, as it touched a daily high at 1.5414 at 4:15 GMT.

Today the cross may be influenced by the following macroeconomic reports listed below.

Fundamentals

United States

Manufacturing PMI by Markit – preliminary reading

Manufacturing activity in the United States probably slowed down in October, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.8, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In September the final seasonally adjusted PMI stood at 53.1, improving from a preliminary 53.0.

According to Markits statement: ”Both output and new business volumes continued to expand at slower rates than those seen earlier in 2015, which contributed to a marked slowdown in job creation during the latest survey period. A renewed fall in input prices provided support to operating margins in September. That said, factory gate charges were unchanged over the month, which ended a three-year period of sustained output price inflation”.

Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 13:45 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.593% on October 22nd, or the highest level since October 20th (0.606%), after which it closed at 0.524% to lose 1.6 basis points (0.016 percentage point) compared to October 21st, while marking a second straight trading day of decline.

The yield on US 2-year government bonds climbed as high as 0.641% on October 22nd, or matching the high from the previous trading day, after which it fell to 0.617% at the close to lose 0.008 percentage point compared to October 21st, while marking a second straight trading day of decline.

The spread between 2-year US and 2-year UK bond yields widened to 0.093% on October 22nd from 0.085% on October 21st. The October 22nd yield spread has been the largest one since September 28th, when the difference was 0.096%.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.837% on October 22nd, after which it slid to 1.797% at the close to lose 0.006 percentage point compared to October 21st, while marking a second consecutive trading day of decline.

The yield on US 10-year government bonds climbed as high as 2.055% on October 22nd, after which it slipped to 2.037% at the close to lose 0.009 percentage point compared to October 21st. It has been the fourth increase in the past nine trading days.

The spread between 10-year US and 10-year UK bond yields widened to 0.240% on October 22nd from 0.225% on October 21st. The October 22nd yield difference has been the largest one since October 15th, when the spread was 0.245%.

Daily and Weekly Pivot Levels

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

R1 – 1.5407
R2 – 1.5420
R3 (range resistance) – 1.5433
R4 (range breakout) – 1.5472

S1 – 1.5381
S2 – 1.5368
S3 (range support) – 1.5355
S4 (range breakout) – 1.5316

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

Central Pivot Point – 1.5381
R1 – 1.5564
R2 – 1.5693
R3 – 1.5876

S1 – 1.5252
S2 – 1.5069
S3 – 1.4940