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Forex Market: GBP/USD trading outlook for September 13th 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3235-1.3349. The pair closed at 1.3337, rising 0.52% compared to Fridays close. It has been the 154th gain in the past 336 trading days. The daily low has been a level unseen since September 1st, when a low of 1.3128 was registered. The major pair has increased its advance to 1.51% so far during the current month, after losing 0.72% in August.

At 7:23 GMT today GBP/USD was edging down 0.19% on the day to trade at 1.3312. The pair touched a daily high at 1.3343 during the early phase of the Asian trading session, undershooting the daily R1 level, and a daily low at 1.3309 during early European trade.

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

Fundamentals

United Kingdom

Consumer Price Index

The annual rate of inflation in the United Kingdom probably accelerated to 0.7% in August, according to the median estimate by experts, from 0.6% in July. If so, it would be the 31st consecutive month, when annualized consumer prices remained below the 2-percent objective, set by the Bank of England. However, it would also be the fastest annual increase in prices since November 2014.

In July, upward pressure to the general index of consumer prices came from cost of transportation (up 0.2% year-on-year, which has been the first gain in 21 months), recreation and culture (up 0.6%, following a 0.8% increase in June), restaurants and hotels (up 2.7%, accelerating from a 2.3% gain in June), miscellaneous goods and services (up 0.9%, slowing down from a 1.1% rate in the prior month), alcoholic beverages and tobacco (up 1.8%, following a 0.5% increase in June), healthcare (up 1.8%, following a 2.7% rate in June), communication (up 3.6%, following a 3.7% increase in June) and education (up 4.8%, or matching the rate in the preceding 9 months), according to the report by the Office for National Statistics.

On the other hand, in July downward pressure to the Consumer Price Index came from cost of housing and utilities (down 0.1% year-on-year, following a 0.1% uptick in June), food and non-alcoholic beverages (down 2.6%, slowing down from a 2.9% drop in June), clothing and footwear (down 0.7%, or matching the rate in June) and furniture, household equipment and maintenance (down 0.8%, accelerating from a 0.5% slump in the prior month).

The annualized core consumer price inflation probably accelerated to 1.4% in August, according to market expectations, from 1.3% in July. 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 Sterling. The Office for National Statistics (ONS) will publish the official CPI report at 8:30 GMT.

United States

Monthly Budget Statement

The United States probably recorded a government budget deficit of USD 108 billion in August, according to market expectations, after a budget gap of USD 113 billion during the previous month. The latter has been a 24% decrease compared to the figure reported in July 2015.

In July total receipts fell 7% to USD 210 billion. Individual income taxes contributed to USD 100 billion, social security and other payroll taxes – USD 82 billion, corporate income taxes – USD 9 billion and other taxes and duties – USD 19 billion.

Total outlays shrank 14% to USD 323 billion during July. Social security contributed to USD 77 billion, Medicare – USD 50 billion, defense – USD 47 billion, interest on debt – USD 28 billion and other outlays – USD 121 billion, according to the report by the US Treasury.

The current fiscal year-to-date budget gap amounted to USD 514 billion through July, or a 10% increase compared to the same period a year earlier.

A smaller-than-projected budget deficit in August would have a moderate bullish effect on the US dollar. The Financial Management Service is to publish the official figure at 18:00 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.211% on September 12th, or the highest level since August 4th (0.211%), after which it closed at 0.173% to lose 0.008 percentage point compared to September 9th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.806% on September 12th, or the highest level since September 6th (0.806%), after which it fell to 0.766% at the close to lose 1.6 basis points (0.016 percentage point) compared to September 9th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.593% on September 12th from 0.601% on September 9th. The September 12th yield spread has been the lowest one since August 19th, when the difference was 0.591%.

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 – 1.3347
R2 – 1.3358
R3 (Range Resistance – Sell) – 1.3368
R4 (Long Breakout) – 1.3400
R5 (Breakout Target 1) – 1.3436
R6 (Breakout Target 2) – 1.3452

S1 – 1.3327
S2 – 1.3316
S3 (Range Support – Buy) – 1.3306
S4 (Short Breakout) – 1.3274
S5 (Breakout Target 1) – 1.3238
S6 (Breakout Target 2) – 1.3222

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

Central Pivot Point – 1.3318
R1 – 1.3397
R2 – 1.3526
R3 – 1.3605
R4 – 1.3684

S1 – 1.3189
S2 – 1.3110
S3 – 1.2981
S4 – 1.2852

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

Central Pivot Point – 1.3126
R1 – 1.3387
R2 – 1.3634
R3 – 1.3895
R4 – 1.4155

S1 – 1.2879
S2 – 1.2618
S3 – 1.2371
S4 – 1.2123

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