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Forex Market: GBP/USD trading outlook for October 14th 2016


Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2133-1.2274. The pair closed at 1.2253, edging up 0.38% compared to Wednesdays close. It has been the 166th gain in the past 359 trading days and also a second consecutive one. The major pair has trimmed its slump to 5.59% so far during the current month, after losing 1.23% in September.

At 6:54 GMT today GBP/USD was edging down 0.38% on the day to trade at 1.2207. The pair touched a daily high at 1.2264 during the early phase of the Asian trading session, undershooting the daily R1 level, and a daily low at 1.2186 during late Asian trade.

On Friday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.


United States

Fed speakers

At 12:30 GMT the Federal Reserve President for Boston and also a FOMC member, Eric Rosengren, is expected to speak at “The Elusive “Great” Recovery: Causes and Implications for Future Business Cycle Dynamics” conference, which will be hosted by the Federal Reserve Bank of Boston.

At 17:30 GMT Federal Reserve Chair, Janet Yellen, is to take a statement during the same event.

Any remarks in regard to US economic outlook, or the Bank’s policy stance would heighten USD volatility.

Retail Sales

Retail sales in the United States probably rebounded in September, according to the median forecast by experts, going up at a monthly rate of 0.6%. In August sales fell 0.3%.

Among the 13 major categories, 4 registered growth, 8 registered a decline and 1 recorded no change in August. Lower sales were registered at miscellaneous store retailers (-2.4%), sporting goods, hobby, book and music stores (-1.4%), building material and garden equipment and supplies dealers (-1.4%), motor vehicle and parts dealers (-0.9%), gasoline stations (-0.8%), furniture and home furniture stores (-0.7%), non-store retailers (-0.3%) and health and personal care stores (-0.1%). On the other hand, monthly sales went up at food services and drinking places (+0.9%) clothing stores (+0.7%), food and beverage stores (+0.3%) and electronics and appliance stores (+0.1%). During the same period, retail sales remained unchanged at general merchandise stores.

In annual terms, retail sales increased 1.9% in August, or at the slowest rate since March, following a revised up 2.4% climb in July.

US core retail sales, or retail sales ex autos, probably rose 0.4% in September compared to a month ago, according to market expectations, following an unexpected 0.1% drop in August. This indicator removes large ticket prices and historical seasonality of automobile sales.

In case the general index of sales rebounded at a sharper rate than anticipated in September, this would have a strong bullish effect on the US dollar. The official report by the US Census Bureau is due out at 12:30 GMT.

Producer Prices

Annual producer prices in the United States probably rose 0.6% in September, according to the median estimate by experts. In August, prices unexpectedly remained flat after falling 0.2% in the preceding month. In case annual producer prices rose at a faster rate than anticipated in September, this would have a limited-to-moderate bullish effect on the US dollar.

The nation’s annualized core producer price inflation, which excludes prices of volatile categories such as food and energy, probably accelerated to 1.2% in September from 1.0% in August. If so, this would be the fastest annual increase in the core PPI since June, when the index gained 1.3%. The Bureau of Labor Statistics is expected to report on the official PPI performance at 12:30 GMT.

Reuters/Michigan Consumer Sentiment Index – preliminary reading

The monthly survey by Thomson Reuters and the University of Michigan may show that consumer confidence in the United States improved in October. The preliminary reading of the corresponding index, which usually comes out two weeks ahead of the final data, probably was at 91.9 during the current month from a final 91.2 in September. The latter came above the preliminary reading of 89.8, which was reported on September 16th.

The sub-index of current economic conditions rose to a final reading of 104.2 in September from a preliminary value of 103.5. In August, this barometer was reported at a final 107.0.

The sub-index of consumer expectations came in at a reading of 82.7, up from a preliminary value of 81.1 in July, and also improving from a final reading of 78.7 registered in August.

Participants in the September survey expected that the rate of inflation will be at 2.4% during the next year, or up from a rate of 2.3% in the preliminary release, but down from a rate of 2.5% in the August survey.

In case the gauge of consumer sentiment met or even exceeded expectations in October, this would have a moderate-to-strong bullish effect on the US Dollar. The preliminary reading is due out at 14:00 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went up as high as 0.223% on October 13th, after which it closed at 0.218% to lose 0.002 percentage point compared to October 12th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.863% on October 13th, after which it fell to 0.847% at the close to lose 1.6 basis points (0.016 percentage point) compared to October 12th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.629% on October 13th from 0.643% on October 12th. The October 13th yield spread has been the lowest one since September 16th, when the difference was 0.619%.

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 – 1.2266
R2 – 1.2279
R3 (Range Resistance – Sell) – 1.2292
R4 (Long Breakout) – 1.2331
R5 (Breakout Target 1) – 1.2376
R6 (Breakout Target 2) – 1.2395

S1 – 1.2240
S2 – 1.2227
S3 (Range Support – Buy) – 1.2214
S4 (Short Breakout) – 1.2175
S5 (Breakout Target 1) – 1.2130
S6 (Breakout Target 2) – 1.2111

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

Central Pivot Point – 1.2443
R1 – 1.2940
R2 – 1.3444
R3 – 1.3941
R4 – 1.4437

S1 – 1.1939
S2 – 1.1442
S3 – 1.0938
S4 – 1.0433

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

Central Pivot Point – 1.3113
R1 – 1.3312
R2 – 1.3645
R3 – 1.3844
R4 – 1.4042

S1 – 1.2780
S2 – 1.2581
S3 – 1.2248
S4 – 1.1914

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