Forex Market: GBP/USD trading outlook for August 19th 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3036-1.3175. The pair closed at 1.3167, surging 0.96% compared to Wednesdays close. It has been the 145th gain in the past 319 trading days. The daily high has been a level unseen since August 5th, when a high of 1.3177 was registered. The major pair has pared its decline to 0.51% so far during the current month, after losing 0.59% of its value in July.

At 6:37 GMT today GBP/USD was edging down 0.17% on the day to trade at 1.3144. The pair touched a daily high at 1.3186 during the early phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.3128 during early Asian trade as well.

No relevant macroeconomic reports and other events, which may influence GBP/USD trading, are scheduled on Friday.

Sterling supported as UK retail sales grow the most since September 2015

The British currency appreciated sharply against peers on Thursday, after the first official report on consumer demand since the EU membership referendum in June showed retail sales in the United Kingdom rose at an annual rate of 5.9% in July, outstripping the median forecast by experts pointing to a 4.2% growth. It has been the fastest annual rate of increase since September 2015. In monthly terms, retail sales went up 1.4% in July, strongly rebounding after a 0.9% decline in June. Market consensus pointed to a much slower growth. Julys index performance was supported by higher sales at non-specialized stores (+3.9% month-over-month), textile, clothing and footwear stores (+3.5%), food stores (+0.6%), and auto fuel stores (+0.6%).

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.175% on August 18th, after which it closed at 0.136% to lose 1.9 basis points (0.019 percentage point) compared to August 17th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.734% on August 18th, after which it fell to 0.714% at the close to lose 1.6 basis points (0.016 percentage point) compared to August 17th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.578% on August 18th from 0.575% on August 17th. The August 18th yield spread has been the largest one since August 15th, when the difference was 0.589%.

Daily, Weekly and Monthly Pivot Levels

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

R1 – 1.3180
R2 – 1.3192
R3 (Range Resistance – Sell) – 1.3205
R4 (Long Breakout) – 1.3243
R5 (Breakout Target 1) – 1.3288
R6 (Breakout Target 2) – 1.3307

S1 – 1.3154
S2 – 1.3142
S3 (Range Support – Buy) – 1.3129
S4 (Short Breakout) – 1.3091
S5 (Breakout Target 1) – 1.3046
S6 (Breakout Target 2) – 1.3027

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

Central Pivot Point – 1.2972
R1 – 1.3041
R2 – 1.3167
R3 – 1.3236
R4 – 1.3305

S1 – 1.2846
S2 – 1.2777
S3 – 1.2651
S4 – 1.2525

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

Central Pivot Point – 1.3171
R1 – 1.3546
R2 – 1.3858
R3 – 1.4233
R4 – 1.4608

S1 – 1.2859
S2 – 1.2484
S3 – 1.2172
S4 – 1.1860