Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.6086-1.6182. The pair closed at 1.6131, gaining 0.07% on a daily basis.

At 8:14 GMT today GBP/USD was up 0.01% for the day to trade at 1.6132. The pair touched a daily high at 1.6154 at 7:10 GMT.

Fundamentals

United Kingdom

Mortgage approvals

The number of mortgage approvals in the United Kingdom probably was 62 250 in September, according to experts’ expectations, down from 64 212 during the prior month. If so, this would be the lowest number since May, when there were 62 000 approved mortgages reported. Mortgage approvals are considered as a leading indicator, reflecting the health of country’s housing market. In case the number of mortgage approvals increases more than anticipated, this implies higher demand in nations housing sector and, respectively, a positive impulse for overall economy. Therefore, the national currency would also be supported. Bank of England will release the official numbers at 9:30 GMT.

Lending secured on dwellings, consumer credit

Net lending secured on dwellings in the United Kingdom, which include bridging loans made by banks and other lenders, probably was at the amount of 2.0 billion GBP in September, according to the median forecast by experts. A month ago mortgage lending amounted to 2.28 billion GBP.

Consumer credit in the country probably was at the amount of 0.800 billion GBP in September, down from 0.898 billion GBP in August. It represents borrowing by the UK personal sector (individuals only) to fund current expenditures on goods and services, which are a driving force behind economic growth. Within a booming economy, however, excessively high levels of consumer lending may be taken as an indication that economy itself is set to overheat. It is so, because individuals tend to borrow money in order to live beyond their means. Within a sluggish economy, in case lending to individuals expanded more than projected, this would usually have a bullish effect on the pound. Bank of England (BoE) is to release the official data at 9:30 GMT.

United States

FOMC policy decision

The Federal Open Market Committee (FOMC) will probably keep its benchmark interest rate unchanged within the range 0-0.25% for a 46th consecutive meeting. In addition, the FOMC members will probably reduce the pace of monthly asset purchases by $15 billion to exit the Quantitative Easing cycle, according to the median forecast by experts.

The minutes of Federal Open Market Committee meeting, conducted in September, revealed that policymakers expressed concerns over recent appreciation of the US dollar and the effects it might have on economic growth and inflation. According to extracts from the minutes: ”During participants discussion of prospects for economic activity abroad, they commented on a number of uncertainties and risks attending the outlook. Over the intermeeting period, the foreign exchange value of the dollar had appreciated, particularly against the euro, the yen, and the pound sterling. Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector. Several participants added that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk. At the same time, a couple of participants pointed out that the appreciation of the dollar might also tend to slow the gradual increase in inflation toward the FOMCs 2 percent goal.

In their discussion of the appropriate path for monetary policy over the medium term, meeting participants agreed that the timing of the first increase in the federal funds rate and the appropriate path of the policy rate thereafter would depend on incoming economic data and their implications for the outlook. That said, several participants thought that the current forward guidance regarding the federal funds rate suggested a longer period before liftoff, and perhaps also a more gradual increase in the federal funds rate thereafter, than they believed was likely to be appropriate given economic and financial conditions.”

Massive bond purchases tend to pressure longer-term interest rates and also devalue the national currency. Scaling back these purchases has the opposite effect on the dollar. Therefore, in case the central bank’s policy makers cut the monthly asset purchases, this would certainly bolster demand for the greenback. The FOMC will announce its official decision on policy at 18:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.6133. In case GBP/USD manages to breach the first resistance level at 1.6180, it will probably continue up to test 1.6229. In case the second key resistance is broken, the pair will probably attempt to advance to 1.6276.

If GBP/USD manages to breach the first key support at 1.6084, it will probably continue to slide and test 1.6037. With this second key support broken, the movement to the downside will probably continue to 1.5988.

The mid-Pivot levels for today are as follows: M1 – 1.6013, M2 – 1.6061, M3 – 1.6109, M4 – 1.6157, M5 – 1.6205, M6 – 1.6253.

In weekly terms, the central pivot point is at 1.6090. The three key resistance levels are as follows: R1 – 1.6187, R2 – 1.6283, R3 – 1.6380. The three key support levels are: S1 – 1.5994, S2 – 1.5897, S3 – 1.5801.