Forex Market: GBP/USD trading outlook for October 21st 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2210-1.2300. The pair closed at 1.2254, edging down 0.25% compared to Wednesdays close. It has been the 197th drop in the past 364 trading days and also a second consecutive one. The major pair has increased its slump to 5.58% so far during the current month, after losing 1.23% in September.

At 7:30 GMT today GBP/USD was inching down 0.09% on the day to trade at 1.2243. The pair touched a daily high at 1.2263 during the early phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.2224 during late Asian trade.

On Friday GBP/USD trading may be influenced by the following event listed below.

Fundamentals

United States

Fed’s Tarullo speech

At 14:15 GMT Federal Reserve Governor and also a voting member of the FOMC, Daniel Tarullo, is expected to speak in New York on “Pedagogy and Scholarship in a Post-Crisis World” at the Columbia Law School Conference on the New Pedagogy of Financial Regulation. Any hints on the Bank’s policy stance or US macroeconomic environment would heighten USD volatility.

Bond Yield Spread

The yield on UK 2-year government bonds went up as high as 0.268% on October 20th, or the highest level since October 17th (0.288%), after which it closed at 0.229% to add 0.009 percentage point compared to October 19th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.827% on October 20th, after which it fell to 0.826% at the close to add 2.3 basis points (0.023 percentage point) compared to October 19th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.597% on October 20th from 0.583% on October 19th. The October 20th yield spread has been the largest one since October 17th, when the difference was 0.615%.

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 – 1.2262
R2 – 1.2271
R3 (Range Resistance – Sell) – 1.2279
R4 (Long Breakout) – 1.2304
R5 (Breakout Target 1) – 1.2332
R6 (Breakout Target 2) – 1.2344

S1 – 1.2246
S2 – 1.2238
S3 (Range Support – Buy) – 1.2229
S4 (Short Breakout) – 1.2205
S5 (Breakout Target 1) – 1.2176
S6 (Breakout Target 2) – 1.2164

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

Central Pivot Point – 1.2241
R1 – 1.2392
R2 – 1.2598
R3 – 1.2749
R4 – 1.2901

S1 – 1.2035
S2 – 1.1884
S3 – 1.1678
S4 – 1.1473

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