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Forex Market: GBP/USD daily trading outlook

Friday’s trade saw GBP/USD within the range of 1.3231-1.5018. The pair closed at 1.3683, plummeting 8.04% compared to Thursdays close. It has been the 152nd drop in the past 280 trading days and also the sharpest daily rate of decline on record. The daily low has been the lowest level since late September 1985. In weekly terms, GBP/USD lost 4.72% of its value during the past week. It has been the 12th drop in the past 25 weeks and also the steepest one in more than 2 years. The major pair has depreciated 7.43% so far in June, following a 0.92% drop in the prior month.

At 6:49 GMT today GBP/USD was losing 1.80% on the day to trade at 1.3434. The pair touched a daily high at 1.3488 during the early phase of the Asian trading session, after beginning the week with a gap down, and a daily low at 1.3357 during early Asian trade as well.

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


United States

Services PMI by Markit – preliminary reading

Activity in the US sector of services probably increased at a faster rate in June from a month ago, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 55.5, according to a projection by Trading Economics. In May the services PMI was reported at a final 51.3, improving from a preliminary reading of 51.2. According to Markit, in May new business growth slowed, backlogs of work dropped, while payrolls grew at the lowest rate since January 2015.

The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels & restaurants. Values above the key level of 50.0 indicate predominant optimism (expansion in general activity). In case a faster than-expected expansion in services sector activity is reported, this would have a moderate bullish effect on the US dollar, as services contribute to a considerable portion of the US GDP. The preliminary reading by Markit Economics is due out at 13:45 GMT.

Correlation with other Majors

Taking into account the business week ended on June 24th 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 EUR/USD (0.9322, or very strong)
GBP/USD to USD/JPY (0.8877, or very strong)
GBP/USD to NZD/USD (0.4950, or moderate)
GBP/USD to AUD/USD (0.4059, or moderate)
GBP/USD to USD/CHF (-0.9683, or very strong)
GBP/USD to USD/CAD (-0.9831, or very strong)

1. During the examined period GBP/USD moved almost equally in one and the same direction with USD/JPY and EUR/USD. This relationship has been the most pronounced between GBP/USD and EUR/USD.

2. GBP/USD moved almost equally in the opposite direction compared to USD/CHF and USD/CAD during the past week. This relationship has been the most pronounced between GBP/USD and USD/CAD.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.337% on June 24th, after which it closed at 0.275% to lose 25.1 basis points (0.251 percentage point) compared to June 23rd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.755% on June 24th, after which it fell to 0.637% at the close to lose 14.6 basis points (0.146 percentage point) compared to June 23rd.

The spread between 2-year UK and 2-year US bond yields, which reflects the flow of funds in a short term, widened to 0.362% on June 24th from 0.257% on June 23rd. The June 24th spread has been the largest one since June 14th, when the difference was 0.373%.

Daily, Weekly and Monthly Pivot Levels

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

R1 – 1.3847
R2 – 1.4011
R3 (range resistance) – 1.4174
R4 (range breakout) – 1.4666

S1 – 1.3519
S2 – 1.3355
S3 (range support) – 1.3192
S4 (range breakout) – 1.2700

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

Central Pivot Point – 1.3977
R1 – 1.4724
R2 – 1.5764
R3 – 1.6511

S1 – 1.2937
S2 – 1.2190
S3 – 1.1150

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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