Forex Market: GBP/USD daily trading forecast

Yesterday’s trade saw GBP/USD within the range of 1.5032-1.5118. The daily low has also been the lowest level since July 15th 2013. The pair closed at 1.5089, losing 0.05% on a daily basis.

At 8:13 GMT today GBP/USD was up 0.07% for the day to trade at 1.5098. The pair touched a daily high at 1.5105 at 8:08 GMT.

Fundamentals

United Kingdom

Balance of trade

The deficit on United Kingdom’s goods trade balance probably narrowed to GBP 9.40 billion in November, according to market expectations, from a deficit figure of GBP 9.62 billion during the preceding month. If so, this would be the smallest trade deficit since August, when a gap of GBP 8.95 billion was reported.

This indicator is also known as visible trade balance, because it reflects the difference in value between exported and imported physical goods, without the inclusion of exported and imported services. Since UK economy is to a great extent dependent on trade, the visible trade balance is considered as a key factor, providing clues over the resilience of nation’s economic growth.

The gap on the nation’s total trade balance shrank to GBP 2.04 billion in October from a revised GBP 2.80 billion deficit, posted in September. October’s deficit has been the least since March, due to a fall in fuel imports and higher sales of silver. Total exports of goods and services amounted to GBP 41.99 billion in October, while total imports were at the amount of GBP 44.01 billion.

Exports of goods rose by GBP 0.2 billion to reach GBP 24.3 billion in October. The largest increase was attributed to exports of erratic items, silver exports in particular, which rose from GBP 0.1 billion in September to GBP 0.3 billion in October, according to the report by the Office for National Statistics (ONS). Imports of goods dropped by GBP 0.7 billion in October, mostly due to a GBP 0.9 billion fall in imports of fuels.

In case UK trade deficit shrank more than anticipated, this would provide support to the pound. The Office for National Statistics will publish the official trade data at 9:30 GMT.

Industrial, Manufacturing output

Annualized industrial production in the United Kingdom probably expanded 1.6% in November, following a 1.1% gain during the preceding month. If so, this would be the fastest production growth rate since August, when activity grew 2.2%. In monthly terms, industrial production probably increased 0.2% in November, following a 0.1% dip in October. The index measures the change in the total inflation-adjusted value of production in sectors such as manufacturing, mining and energetics.

United Kingdom’s annualized manufacturing production, a short-term indicator which accounts for almost 80% of nation’s industrial output, probably expanded 2.3% in November. In October manufacturing output rose at an annualized pace of 1.7%, or the least since December 2013, when a growth rate of 1.4% was registered. In monthly terms, production probably increased 0.3% during November, according to expectations. As it is a key component of the country’s Gross Domestic Product, in case manufacturing production expanded more than projected, this would have a bullish effect on the sterling. The Office for National Statistics (ONS) will release the official industrial data at 9:30 GMT.

BoE decision on policy

Yesterday the sterling plunged to lows unseen since July 2013 against the US dollar, while the Bank of England left monetary stimulus and the benchmark interest rate unchanged, as expected.

United States

Change in Non-farm Payrolls, Unemployment rate

Employers in all sectors of economy in the United States, excluding the farming industry, probably added 240 000 new jobs in December, according to the median forecast by experts, after a job gain of 321 000 in November. If so, this would be the fourth consecutive month, when employment gains exceeded 200 000. Novembers figure has been the highest since May 2010, when 433 000 jobs were added.

Employment in professional and business services increased by 86 000 in November, compared with an average gain of 57 000 a month during the preceding 12 months. Employment in retail trade rose by 50 000 during the same period, compared with an average gain of 22 000 per month during the past 12 months. Health care added 29 000 jobs in November, manufacturing added 28 000 jobs, while financial activities added 20 000 jobs.

The non-farm payrolls report presents the total number of US employees in any business, excluding the following four groups: farm employees, general government employees, employees of non-profit organizations, private household employees. The reading, released most often, varies between 10 000 and as much as 250 000 – 300 000 at times when economy is performing well. Despite the volatility and the possibility of large revisions, the non-farm payrolls indicator presents the most timely and comprehensive reflection of the current economic state. Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a larger-than-expected gain in jobs, the US dollar would certainly be boosted.

Average Hourly Earnings probably climbed 0.2% in December compared to November, when earnings rose by 0.4%, or the largest monthly rate of increase since February.

Meanwhile, the rate of unemployment in the country probably dropped to 5.7% in December from 5.8% in November. If so, this would be the lowest rate since July 2008.

In November the unemployment rate for adult men climbed to 5.4% in November, the rate for adult women reached 5.3%, while the rate for teenagers was reported at 17.7%. During the month the number of unemployed persons rose to 9.1 million from 9.0 million in October, according to the report by the Bureau of Labor Statistics. The number of long-term unemployed during November (those jobless for 27 weeks or more) was at 2.8 million, down from 2.9 million in the prior month, while accounting for 30.7% of the total number of the unemployed. The number of persons in part-time employment for economic reasons was reported at 6.9 million in November, down from 7.0 million in October.

The unemployment rate represents the percentage of the eligible work force that is unemployed, but is actively seeking employment. A person who is not classified as employed or unemployed is excluded from the statistics. One counts as unemployed, if he falls in all of the following categories: he/she was unemployed during the last week; he/she is able bodied; he/she has been seeking employment for a period of at least four weeks, which end during the week when the research is conducted. People, who have been laid off and are awaiting to be hired again, are also classified as unemployed. In case the unemployment rate met expectations or even fell further, this would have a bullish effect on the greenback. The Bureau of Labor Statistics will release the official employment data at 13:30 GMT.

Rate hike prospects

Market players saw a 58% probability that the Federal Reserve Bank will increase the target for the federal funds rate from the current range of 0%-0.25% to at least 0.5% by September, according to futures data by Bloomberg.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.5080. In case GBP/USD manages to breach the first resistance level at 1.5127, it will probably continue up to test 1.5166. In case the second key resistance is broken, the pair will probably attempt to advance to 1.5213.

If GBP/USD manages to breach the first key support at 1.5041, it will probably continue to slide and test 1.4994. With this second key support broken, the movement to the downside will probably continue to 1.4955.

The mid-Pivot levels for today are as follows: M1 – 1.4975, M2 – 1.5018, M3 – 1.5061, M4 – 1.5104, M5 – 1.5147, M6 – 1.5190.

In weekly terms, the central pivot point is at 1.5425. The three key resistance levels are as follows: R1 – 1.5524, R2 – 1.5721, R3 – 1.5820. The three key support levels are: S1 – 1.5228, S2 – 1.5129, S3 – 1.4932.