Yesterday’s trade saw GBP/USD within the range of 1.4350-1.4561. The pair closed at 1.4436, falling 0.74% on a daily basis, or the most since December 2nd 2015, when it plunged 0.86%. It has been the seventh drop in the past eight trading days. The daily low has been the lowest level since June 8th 2010, when a low of 1.4346 was registered.
At 8:43 GMT today GBP/USD was losing 0.07% for the day to trade at 1.4438. The pair touched a daily low at 1.4419 at 8:14 GMT, undershooting the daily S1 level, and a daily high at 1.4477 during mid-Asian trading session. Resistance may be encountered at the hourly 21-period EMA (1.4452), then – in the area around the current daily high (1.4477), and finally – at the hourly 55-period EMA (1.4488). Support may be received in the 1.4400-1.4420 area and then – in the area around the low from January 12th (1.4350).
On Wednesday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
Fed speakers
At 13:00 GMT the Federal Reserve Bank of Boston President, Eric Rosengren, is expected to take a statement, followed by a speech by the Fed President for Chicago, Charles Evans, scheduled at 17:30 GMT.
Monthly Budget Statement
The United States probably recorded a government budget deficit of USD 2.7 billion in December, according to market expectations, after a budget gap of USD 65.0 billion during the previous month. The latter represented a 14% increase compared to the figure posted in November a year ago, but yet, it has been the smallest deficit since August 2015.
In November total receipts were at USD 205 billion (a 7.3% year-on-year increase), while total outlays amounted to USD 270 billion (an 8.9% year-on-year surge), according to the report by the US Treasury.
The current fiscal year-to-date budget gap amounted to USD 201 billion, or a 13% increase compared to the same period a year earlier.
A larger-than-projected budget deficit in December would have a moderate bearish effect on the greenback. The Financial Management Service is to publish the official figure at 19:00 GMT.
”Beige Book” report
Also at 19:00 GMT, the Federal Reserve is to release its ”Beige Book” report, which is published eight times during the year. Each of the banks in the 12 Federal Reserve Districts gathers data in regard to current economic situation in the country on the basis of interviews with key business contacts, economists, market experts, and other sources. In case the Beige Book presents an optimistic economic outlook, this will usually support the US dollar, while a pessimistic view will have a bearish effect on the currency.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.544% on January 12th, after which it closed at 0.499% to lose 2.3 basis points (0.023 percentage point) compared to January 11th. It has been the 12th drop in the past 19 trading days and also a second consecutive one.
The yield on US 2-year government bonds climbed as high as 0.968% on January 12th, or the highest level since January 8th (1.016%), after which it closed at 0.936% to lose 0.004 percentage point compared to January 11th. It has been the 12th drop in the past 20 trading days.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.437% on January 12th from 0.418% on January 11th. The January 12th yield spread has been the largest one since January 6th, when the difference was 0.459%.
Meanwhile, the yield on UK 10-year government bonds soared as high as 1.814% on January 12th, or the highest level since January 8th (1.824%), after which it closed at 1.749% to lose 3 basis points (0.03 percentage point) compared to January 11th. It has been the 12th drop in the past 19 trading days.
The yield on US 10-year government bonds climbed as high as 2.200% on January 12th, after which it slipped to 2.119% at the close to lose 5.6 basis points (0.056 percentage point) compared to January 11th. It has been the 13th drop in the past 20 trading days.
The spread between 10-year US and 10-year UK bond yields narrowed to 0.370% on January 12th from 0.396% on January 11th. The January 12th yield difference has been the lowest one since January 8th, when the spread was 0.344%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.4455
R2 – 1.4475
R3 (range resistance) – 1.4494
R4 (range breakout) – 1.4552
S1 – 1.4417
S2 – 1.4397
S3 (range support) – 1.4378
S4 (range breakout) – 1.4320
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.4613
R1 – 1.4722
R2 – 1.4924
R3 – 1.5033
S1 – 1.4411
S2 – 1.4302
S3 – 1.4100
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