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Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.4361-1.4459. The pair closed at 1.4372, edging down 0.09% on a daily basis. It has been the 34th drop in the past 63 trading days. The daily high has been the highest level since March 21st, when a high of 1.4481 was recorded. GBP/USD has trimmed its advance to 3.00% so far during the current month.

At 6:24 GMT today GBP/USD was edging down 0.23% for the day to trade at 1.4339. The pair touched a daily low at 1.4327 at 6:17 GMT, undershooting the lower range breakout level (S4), and a daily high at 1.4380 during the early phase of the Asian trading session.

On Thursday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.

Fundamentals

United Kingdom

Consumer Lending, Mortgage Approvals

Lending to consumers in the United Kingdom probably decreased to GBP 1.400 billion in February from GBP 1.564 billion in January. The latter has been the largest amount borrowed since February 2008. This indicator represents borrowing by the UK personal sector (individuals only) to fund current expenditures on goods and services, which are a driving force behind economic growth. Given the current state of the economy, in case lending to individuals decreased at a lesser rate than projected, this would usually have a moderate bullish effect on the sterling. Bank of England (BoE) is to release the official numbers at 8:30 GMT.

At the same time, the number of mortgage approvals in the United Kingdom probably decreased to 74 000 in February, according to experts’ expectations, from 74 581 in January. The latter has been the highest number since January 2014, when a revised up number of 76.947 mortgages approved was reported (76.753 previously). Mortgage approvals are considered as a leading indicator, reflecting the health of the country’s housing market. In case the number of mortgages approved fell more than anticipated, this would imply potentially lower demand in the nations housing sector and, respectively, a somewhat negative impulse for overall economy. Therefore, it would have a moderate bearish effect on the sterling. Bank of England will release the official data at 8:30 GMT.

Gross Domestic Product – final estimate

The final estimate of United Kingdoms GDP probably confirmed the 2nd estimate, released on February 25th, that economy expanded at a rate of 1.9% during the final quarter of 2015 compared to the same period a year ago. It has been the slowest GDP growth rate since Q3 2013, when economy expanded 1.9%. UK GDP grew at an annualized rate of 2.1% in the third quarter, down from a second estimate, pointing to a 2.3% growth.

According to the revised data, household spending expanded 3.1% year-on-year in Q4, or matching the rate in the prior quarter. Government spending grew 2.5% year-on-year, accelerating from 1.7% growth in Q3. Spending growth of non-profit institutions serving households accelerated to 3.2% in Q4 from 1.22% in Q3, while gross fixed capital formation growth decelerated to 2.7% during the period from 2.9% in the preceding quarter. UK exports grew 2.1% in Q4, slowing down from 6.1% in Q3, while UK imports expanded 4.8% in the last quarter of 2015, decelerating from a 6.5% growth in Q3, according to revised data by the Office for National Statistics (ONS).

On a quarterly basis, the final estimate of UK GDP probably also matched the 2nd estimate of a 0.5% growth during Q4, following a 0.4% expansion during the third quarter. The latter has been the slowest quarterly growth since Q1 2015, when UK GDP rose 0.4%.

In case the final annual rate of growth was faster-than-anticipated, this would have a strong bullish effect on the sterling. The ONS is to release the final report at 8:30 GMT.

United States

Initial, Continuing Jobless Claims

The number of people in the United States, who filed for unemployment assistance for the first time during the business week ended on March 25th, probably remained at 265 000 for a second straight week, according to market expectations.

The 4-week moving average, an indicator lacking seasonal effects, was 259 750, marking an increase by 250 compared to the preceding weeks revised down average.

The business week, which ended on March 18th has been the 55th consecutive week, when jobless claims stood below the 300 000 threshold, which suggested a healthy labor market. This has been the longest streak since 1973.

Initial jobless claims number is a short-term indicator, reflecting lay-offs in the country. In case the number of claims met expectations or fell further, this would have a moderate bullish effect on the US dollar.

The number of continuing jobless claims probably rose to the seasonally adjusted 2 210 000 during the business week ended on March 18th from 2 179 000 in the preceding week. The latter has been the lowest number since the business week ended on November 20th 2015, when 2 161 000 claims were reported. The figure also represented a decrease by 39 000 compared to the revised down number of claims reported in the week ended on March 4th. This indicator reflects the actual number of people unemployed and currently receiving unemployment benefits, who filed for unemployment assistance at least two weeks ago.

The Department of Labor is to release the weekly report at 12:30 GMT.

Chicago PMI

The Chicago Purchasing Managers Index (PMI) probably improved to a reading of 50.0 in March, according to market expectations, from 47.6 during the prior month. The latter has been the lowest reading since December 2015, when the PMI came in at 42.9. The index reflects business conditions in the regions manufacturing sector and is interrelated with the Manufacturing Index, published by the Institute for Supply Management (ISM). A reading above the key level of 50.0 is indicative of optimism (expansion in manufacturing activity), while a reading of 50.00 indicates no change in business conditions. In case the PMI improved more than forecast, this would have a moderate bullish effect on the US dollar. The ISM-Chicago Inc. will release the official reading of this key barometer at 13:45 GMT.

Fed Speakers

Following the rather dovish comments by the Fed Chair, Janet Yellen on March 29th, two more Federal Reserve officials are expected to take a statement today – the Fed President for Chicago, Charles Evans, at 13:30 GMT and the Fed President for New York, William Dudley, at 21:00 GMT. Their remarks could introduce moderate volatility in the Foreign Exchange Market as well as in other market segments.

Daily and Weekly Pivot Levels

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

R1 – 1.4381
R2 – 1.4390
R3 (range resistance) – 1.4400
R4 (range breakout) – 1.4426

S1 – 1.4363
S2 – 1.4354
S3 (range support) – 1.4345
S4 (range breakout) – 1.4318

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

Central Pivot Point – 1.4226
R1 – 1.4397
R2 – 1.4651
R3 – 1.4822

S1 – 1.3972
S2 – 1.3801
S3 – 1.3547

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