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Forex Market: GBP/USD trading outlook for August 24th 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3129-1.3213. The pair closed at 1.3198, rising 0.46% compared to Mondays close. It has been the 147th gain in the past 322 trading days and also a second consecutive one. The daily high has been the highest level since August 4th, when a high of 1.3347 was registered. The major pair has trimmed its loss to 0.27% so far during the current month, after losing 0.59% of its value in July.

At 6:45 GMT today GBP/USD was edging down 0.23% on the day to trade at 1.3167. The pair touched a daily high at 1.3204 during the early phase of the Asian trading session, undershooting the daily R1 level, and a daily low at 1.3162 during late Asian trade.

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


United Kingdom

BBA Home Loans

The number of home loans in the United Kingdom, issued by the British Bankers’ Association (BBA), probably decreased to 38 500 in July, according to market expectations, from the unrevised 40 100 in June. The BBA features the major banks in the country, which account for almost 60% of overall mortgage lending. The number of mortgage loans is considered as a leading indicator in regard to UK housing market conditions. As growth in mortgage lending signifies a healthy housing sector, which also contributes to overall economic activity, in case the number of loans dropped more than projected, this would have a moderate bearish effect on the Sterling. The BBA is to publish the official figure at 8:30 GMT.

United States

Existing Home Sales

The index of existing home sales in the United States probably dropped 0.4% to a level of 5.51 million in July compared to June, according to the median estimate by experts. In June sales were 1.1% higher from a month ago to reach 5.57 million, or a level unseen since February 2007. Sales of new single-family houses rose at a monthly rate of 0.8% in June, while sales of condos surged 3.2%. At the same time, the average sales price was 4% higher from a month ago.

In case the index decreased at a steeper monthly rate than anticipated, this would have a limited-to-moderate bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 14:00 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.151% on August 23rd, after which it closed at 0.138% to add 1.5 basis points (0.015 percentage point) compared to August 22nd.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.762% on August 23rd, after which it fell to 0.761% at the close to add 1.9 basis points (0.019 percentage point) compared to August 22nd.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.623% on August 23rd from 0.619% on August 22nd. The August 23rd yield spread has been the largest one so far this year.

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 – 1.3206
R2 – 1.3213
R3 (Range Resistance – Sell) – 1.3221
R4 (Long Breakout) – 1.3244
R5 (Breakout Target 1) – 1.3271
R6 (Breakout Target 2) – 1.3282

S1 – 1.3190
S2 – 1.3183
S3 (Range Support – Buy) – 1.3175
S4 (Short Breakout) – 1.3152
S5 (Breakout Target 1) – 1.3125
S6 (Breakout Target 2) – 1.3114

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

Central Pivot Point – 1.3043
R1 – 1.3220
R2 – 1.3363
R3 – 1.3540
R4 – 1.3717

S1 – 1.2900
S2 – 1.2723
S3 – 1.2580
S4 – 1.2437

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

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