Friday’s trade saw GBP/USD within the range of 1.3243-1.3350. The pair closed at 1.3266, shedding 0.34% compared to Thursdays close. It has been the 155th drop in the past 285 trading days and also a second consecutive one. In weekly terms, the major pair lost 3.03% of its value during the past week. It has been the 13th drop in the past 26 weeks and also a second successive one. The cross has fallen 0.21% so far during the current month, after depreciating 7.94% in June. The latter has been the worst performance since October 2008.
At 7:02 GMT today GBP/USD was edging up 0.13% on the day to trade at 1.3283. The pair touched a daily high at 1.3308 during the mid phase of the Asian trading session and a daily low at 1.3247 during early Asian trade.
On Monday GBP/USD trading may be influenced by the following macroeconomic report as listed below.
Fundamentals
United Kingdom
Construction PMI
Activity in United Kingdom’s sector of construction probably increased at a slower rate in June compared to a month ago, with the corresponding Purchasing Managers Index coming in at a reading of 50.5, according to market expectations, down from 51.2 in May. If so, June would be the 38th consecutive month, when the gauge inhabited the area above 50.0, but it would also mark the lowest PMI level since April 2013. The index is based on a survey, encompassing managers of companies, operating in the construction sector. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify predominant optimism in regard to business conditions. In case, however, the PMI slowed down more than projected in June, this would have a limited-to-moderate bearish effect on the Sterling. The Chartered Institute of Purchasing and Supply (CIPS) is to release the official index reading at 8:30 GMT.
US Independence Day
Monday marks the Independence Day federal holiday in the United States, which commemorates the adoption of the Declaration of Independence on July 4th 1776, declaring independence from the Kingdom of Great Britain (at present the United Kingdom). Markets in the country are to remain closed.
Correlation with other Majors
Taking into account the business week ended on July 1st 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 USD/JPY (0.6098, or strong)
GBP/USD to EUR/USD (0.4846, or moderate)
GBP/USD to USD/CHF (0.4572, or moderate)
GBP/USD to AUD/USD (0.3819, or moderate)
GBP/USD to NZD/USD (0.2908, or weak)
GBP/USD to USD/CAD (-0.4240, or moderate)
1. During the examined period GBP/USD moved strongly in one and the same direction with USD/JPY.
2. GBP/USD moved to a moderate extent in one and the same direction with AUD/USD, USD/CHF and EUR/USD during the past week, while moving to a moderate extent in the opposite direction compared to USD/CAD.
3. The correlation between GBP/USD and NZD/USD was insignificant.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.197% on July 1st, after which it closed at 0.180% to add 7 basis points (0.07 percentage point) compared to June 30th.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.601% on July 1st, after which it fell to 0.597% at the close to add 1.1 basis points (0.011 percentage point) compared to June 30th.
The spread between 2-year UK and 2-year US bond yields, which reflects the flow of funds in a short term, widened to 0.417% on July 1st from 0.476% on June 30th. The July 1st yield spread has been the lowest one since June 24th, when the difference was 0.362%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for GBP/USD are presented as follows:
R1 – 1.3276
R2 – 1.3286
R3 (range resistance) – 1.3295
R4 (range breakout) – 1.3325
S1 – 1.3256
S2 – 1.3246
S3 (range support) – 1.3237
S4 (range breakout) – 1.3207
By using the traditional method of calculation, the weekly pivot levels for GBP/USD are presented as follows:
Central Pivot Point – 1.3316
R1 – 1.3514
R2 – 1.3762
R3 – 1.3960
S1 – 1.3068
S2 – 1.2870
S3 – 1.2622
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3818
R1 – 1.4510
R2 – 1.5710
R3 – 1.6402
S1 – 1.2618
S2 – 1.1926
S3 – 1.0726
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