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Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.4116-1.4319. The pair closed at 1.4204, edging down 0.38% compared to Fridays close. It has been the 34th drop in the past 57 trading days and also a fourth consecutive one. The daily low has been the lowest level since April 14th, when a low of 1.4088 was registered. The major pair has fallen 2.18% so far in June, following a 0.92% drop in the prior month.

At 6:37 GMT today GBP/USD was edging down 0.34% on the day to trade at 1.4156. The pair touched a daily high at 1.4271 during early Asian trade, overshooting the range resistance level (R3), and a daily low at 1.4150 at 6:36 GMT.

On Tuesday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United Kingdom

Consumer Inflation

The annual rate of inflation in the United Kingdom probably accelerated to 0.4% in May, according to the median estimate by experts, from 0.3% in April. If so, it would be the 28th consecutive month, when annualized consumer prices remained below the 2-percent objective, set by Bank of England.

In April upward pressure to consumer prices came from prices at restaurants and hotels (up 2.3% year-on-year). An additional upward impulse came from cost of recreation and culture (up 0.4% and rebounding from a 0.2% drop in March), while cost of clothing and footwear decelerated (up 0.3% in April down from a 1.4% surge in March), according to the report by the Office for National Statistics. Inflation for miscellaneous goods and services remained stable at 1% during the period.

On the other hand, in April downward pressure to the Consumer Price Index came from cost of transport (down 1.3% year-on-year after edging down 0.1% in March), cost of housing and utilities (down 0.1% and following a 0.4% increase in March) and prices of food and non-alcoholic beverages (down 2.5% and slowing from a 2.7% slump in March).

The annualized core consumer price inflation probably accelerated to 1.3% in May, according to market expectations, from 1.2% in April. This indicator measures the change in prices of goods and services purchased by consumers, without taking into account volatile components such as food, energy products, alcohol and tobacco.

In case the annual CPI came in line with expectations or further approached the central bank’s inflation objective, this would have a strong bullish effect on the Pound. The Office for National Statistics (ONS) will publish the official CPI report at 8:30 GMT.

United States

Retail Sales

Retail sales in the United States probably rose for a second straight month in May, going up at a monthly rate of 0.3%, according to the median forecast by experts, following a 1.3% surge in April. The latter has been the fastest monthly increase since March 2015, supported by sales of automobiles.

Among the 13 major categories, 11 registered growth, 1 showed decline and 1 registered no growth in April. During the period, a decrease in sales was registered at building materials and garden equipment dealers (-1.0% month-over-month).

On the other hand, in March, retail sales went up motor vehicle and part dealers (up 3.2% month-over-month), at gasoline stations (2.2%), non-store retailers (2.1%), miscellaneous store retailers (1.5%), clothing stores (1%), food and beverages places (0.9%), health and personal care stores (0.9%), furniture and home furniture stores (0.7%), electronics and appliance stores (0.5%), food services and drinking places (0.3%) and sporting goods, hobby, book and music stores (0.2%), according to the report by the US Census Bureau.

Sales at in general merchandise stores remained unchanged in April from a month ago.

Annualized retail sales increased 3.0% in April, following a 1.7% climb in March.

US core retail sales, or retail sales ex autos, probably rose 0.4% in May compared to a month ago, following a 0.8% gain in April. If so, it would be a third consecutive month of increase. This indicator removes large ticket prices and historical seasonality of automobile sales.

A larger-than-expected rate of increase in both indexes would have a strong bullish effect on the US dollar. The official report is due out at 12:30 GMT.

Import and Export Prices

Prices of imported goods in the United States probably rose for a third consecutive month in May, going up at a monthly rate of 0.7%, according to market expectations. If so, this would be the steepest monthly increase since May 2015, when a revised down rate of 1.2% was reported. In April import prices were 0.3% higher from a month ago, as imported fuel prices went up 3.3%, while non-fuel prices (consumer goods, foods and beverages, feeds, capital goods) edged up 0.1%. In annual terms, import prices were 5.7% lower in April, which has been the 21st consecutive month of decline. Generally, higher import prices of goods suggest higher rates of consumer inflation.

Prices of exported goods from the United States probably increased 0.3% in May, according to market expectations. In April export prices rose 0.5% from a month ago, as non-agricultural export prices surged 0.5%, supported by higher costs for industrial supplies and materials and capital goods, while agricultural export prices went up 0.5%, supported by prices of soybeans. In annual terms, export prices slumped 5.0% in May, or for a 20th month in a row. Lower prices of exported goods generally bolster demand abroad, and as US trade accounts for 20% of international trade relations, this also tends to be dollar positive.

The Department of Labor is expected to release the official numbers at 12:30 GMT.

Daily, Weekly and Monthly Pivot Levels

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

R1 – 1.4223
R2 – 1.4241
R3 (range resistance) – 1.4260
R4 (range breakout) – 1.4316

S1 – 1.4185
S2 – 1.4167
S3 (range support) – 1.4148
S4 (range breakout) – 1.4092

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

Central Pivot Point – 1.4360
R1 – 1.4543
R2 – 1.4828
R3 – 1.5011

S1 – 1.4075
S2 – 1.3892
S3 – 1.3607

In monthly terms, for GBP/USD we have the following pivots:

Central Pivot Point – 1.4526
R1 – 1.4722
R2 – 1.4966
R3 – 1.5162

S1 – 1.4282
S2 – 1.4086
S3 – 1.3842

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