Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5588-1.5721. The pair closed at 1.5682, gaining 0.31% on a daily basis.

At 8:15 GMT today GBP/USD was down 0.12% for the day to trade at 1.5661. The pair touched a daily low at 1.5632 at 7:35 GMT.

Fundamentals

United Kingdom

Retail Sales

Annualized retail sales in the United Kingdom probably rose at a rate of 3.8% in October, according to the median forecast by experts, after in September sales climbed 2.7%. If so, this would be the fastest annual rate of increase since April, when the index of sales gained 6.5%. In monthly terms, retail sales probably rose 0.3% during October, making up for the 0.3% drop in the prior month. Annualized retail sales, without taking into account fuel sales, probably rose 4.2% in October, following another 3.1% gain in September.

This is a short-term indicator, which provides key information about consumption on a national scale. Higher retail sales suggest stronger consumer demand, confidence and economic growth, respectively. Therefore, in case the index of retail sales increased at a faster-than-projected pace, this would be pound positive. The Office for National Statistics is expected to publish the official report at 9:30 GMT.

CBI Industrial Orders

The gauge of industrial orders in the United Kingdom probably remained unchanged at a reading of -6 during the three months to November, according to expectations. This indicator reflects the net balance between companies, that registered an increase in industrial orders during the respective period of three months and those, that registered a drop. It is the oldest indicator, released from the UK private sector, to show the development tendency in countrys industrial sector. The Industrial Trends Survey by the Confederation of British Industry (CBI) provides expert qualitative opinion from senior manufacturing executives, on past and expected trends in output, exports, prices, costs, investment intentions, business confidence and capacity utilization. A level above zero suggests that volume of orders is projected to increase, while a level below zero indicates that expectations point to lower volumes. If the survey showed predominant pessimism, this would usually have a bearish effect on the sterling. The CBI will announce the results from its survey, encompassing 17 industries, at 11:00 GMT.

United States

Consumer inflation

The annualized consumer inflation in the United States probably decelerated to 1.6% in October, according to market expectations, from 1.7%, registered in September and August. In monthly terms, the Consumer Price Index (CPI) probably dipped 0.1% in October, following a 0.1% gain in the prior month. In September increases in shelter and food prices outweighed declines in energy costs. The food index rose 0.3%, as five of the six major grocery store food group indexes increased. The energy index, at the same time, lost 0.7%, as the indexes for gasoline, electricity and fuel oil all decreased, according to the report by the Bureau of Labor Statistics.

The CPI is based on a basket of goods and services bought and used by consumers on a daily basis. In the United States the Bureau of Labor Statistics (BLS) surveys the prices of 80 000 consumer items in order to calculate the index. The latter reflects prices of commonly purchased items by primarily urban households, which represent about 87% of the US population. The Bureau processes price data from 23 000 retail and service businesses.

The CPI includes sales taxes, but excludes income taxes, costs of investments such as stocks and bonds and sales prices of homes.

The annualized Core CPI, which excludes prices of food and energy, probably remained unchanged at 1.7% in October. It is usually reported as a seasonally adjusted figure, because consumer patterns are widely fluctuating in dependance on the time of the year. The Core CPI is a key measure, because this is the gauge, which the Federal Reserve Bank takes into account in order to adjust its monetary policy. The Fed uses the core CPI, because prices of food, oil and gas are highly volatile and central bank’s tools are slow-acting. In case, for example, prices of oil surge considerably, this could lead to a high rate of inflation, but the central bank will not take action until this increase affects prices of other goods and services.

If the CPI tends to approach or comes in line with the inflation objective, set by the Federal Reserve and considered as providing price stability, or 2%, this will usually support demand for the US dollar. However, quite high rates of inflation (well above central bank’s inflation target) can be harmful to economy and as a result, this may lead to the loss of confidence in the local currency.

The Bureau of Labor Statistics is to release the official CPI report at 13:30 GMT.

Manufacturing data by Markit – preliminary release

Manufacturing activity in the United States probably expanded in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 56.4, or the highest since September. In October the final seasonally adjusted PMI stood at 55.9. Output and new business growth moderated in October, job creation remained robust, while input cost inflation was the weakest since April, according to Markit Economics. Values above the key level of 50.0 indicate optimism (increasing activity). Higher-than-expected PMI readings would certainly support the US dollar. The preliminary data by Markit is due out at 14:45 GMT.

Leading Economic index by the CB

The Conference Board Leading Economic Index for the United States probably increased 0.6% in October compared to a month ago, acording to the median forecast by experts. In September compared to August the index gained 0.8%. It covers a variety of economic indicators, which signify possible changes in overall economic activity. The index is comprised by the following components: average weekly hours in manufacturing, average weekly initial claims for unemployment insurance, manufacturers’ new orders, consumer goods and materials, ISM Index of New Orders, manufacturers new orders, nondefense capital goods excluding aircraft orders, building permits, new private housing units, Stock prices, 500 common stocks, Leading Credit Index, interest rate spread, 10-year Treasury bonds less federal funds, average consumer expectations for business conditions. Better-than-expected performance of the index is usually dollar positive. The Conference Board research group is to release the official data at 15:00 GMT.

Philadelphia Fed Manufacturing Index

The Philadelphia Fed Manufacturing Index probably fell to a reading of 18.3 in November from 20.7 index points during the previous month. If so, this would be the lowest value since May, when the index was reported at 17.8. This indicator is based on a monthly business survey (the Business Outlook Survey), measuring manufacturing activity in the third district of the Federal Reserve, Philadelphia. Participants give their opinion about the direction of business changes in overall economy and different indicators of activity in their companies, such as employment, working hours, new and existing orders, deliveries, inventories, delivery time, price etc. The survey is conducted every month since May 1968. The results are presented as the difference between the percentages of positive and negative projections. A level above zero is indicative of improving conditions, while a level below zero is indicative of worsening conditions. Lower-than-anticipated index readings would have a bearish effect on the greenback. The Federal Reserve Bank of Philadelphia is expected to release the official results from the survey at 15:00 GMT.

Existing Home Sales

The index of existing home sales in the United States probably remained flat in October compared to September at a level of 5.16 million. In September compared to August existing home sales rose 2.4% to 5.17 million, or the highest level since September 2013. The sample of data encompasses condos, co-ops and single-family houses.

Statistical data on existing home sales is often used along with statistical figures regarding the new home sales and pending home sales, with the major objective being to draw a conclusion how nation’s housing sector is performing, regardless of interest rates. The most active house-purchasing period in the United States is usually between the months of March through June. Therefore, in case statistical data revealed a sudden drop in the number of homes sold rather than an improvement during this period, this would be considered as a signal of weakness in country’s housing market.

The report on existing home sales usually does not cause a real direct impact on US economy. Actually, this effect appears to be minimal, due to the fact that nothing is produced with the mere sale of an existing home. In terms of economic activity, the sale of an existing house may be related only to interior design and purchases of new furniture.

In case the index showed a better-than-projected performance, this would usually have a bullish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.5664. In case GBP/USD manages to breach the first resistance level at 1.5739, it will probably continue up to test 1.5797. In case the second key resistance is broken, the pair will probably attempt to advance to 1.5872.

If GBP/USD manages to breach the first key support at 1.5606, it will probably continue to slide and test 1.5531. With this second key support broken, the movement to the downside will probably continue to 1.5473.

The mid-Pivot levels for today are as follows: M1 – 1.5502, M2 – 1.5569, M3 – 1.5635, M4 – 1.5702, M5 – 1.5768, M6 – 1.5835.

In weekly terms, the central pivot point is at 1.5735. The three key resistance levels are as follows: R1 – 1.5879, R2 – 1.6087, R3 – 1.6231. The three key support levels are: S1 – 1.5527, S2 – 1.5383, S3 – 1.5175.